When the news came out July 2 that the Affordable Care Act (ACA) employer mandate — the enforcement of the shared responsibility requirement — would be postponed until 2015, you may have felt relief. But for many large-group employers, it’s not so simple.
“This is not a reason to put your head back in the sand,” says Mark Haegele, director of sales and account management at HealthLink. “Keep your eyes open. See what’s going on. Run some cost benefit analyses of different scenarios of offering different levels of coverage, or not offering. The bulk of the health care reform law is still being implemented on Jan. 1, 2014.”
In fact, Haegele says in some instances it may make sense to follow the employer mandate now, as waiting until 2015 could cause certain problems downstream.
Smart Business spoke with Haegele about what this delay means for business owners and their employees.
What was delayed until January 2015?
The Obama administration announced a one-year delay of the requirement that insurance companies and employers report certain information about health insurance coverage offered to individuals and employees, as well as the employer mandate.
It doesn’t change anything relating to the community rating rules, the individual mandate, the $8 billion sector tax, etc. These provisions are causing employers to explore self-funding, and all are still in play for January.
In what scenario does waiting to follow the employer mandate in 2015 create problems?
Large employers — those with 50 or more employees, according to the legislation — with employees who work 30 to 39 hours who don’t receive insurance face a unique situation. These employers were expecting to either pay a penalty or the need to offer some form of coverage. Many contemplated offering minimum essential coverage plans, or skinny bones plans, that just cover prevention and wellness — no hospitalization.
Let’s say an employer has 300 employees who work 30 to 39 hours and receive no benefits, and with the delay the company doesn’t plan to offer any until 2015. These employees still must have insurance coverage to meet next year’s individual mandate.
Many also are eligible for sliding-scale subsidies on the new health care exchanges — those with an income level 400 percent or lower than the federal poverty level. In 2013, that qualifies any family of four with an annual income of less than $94,200, or $45,960 for an individual.
Fast forward to 2015, a portion of the 300 employees have gone on the exchange and gotten insurance with subsidies. Now, you want to provide pared-down benefits to avoid the employer mandate penalties, which basically strips the employees of their subsidy, possibly increasing their insurance costs and/or decreasing their coverage. This might make it worthwhile to price out minimum essential benefit plans for 2014. Otherwise, employees may believe you did this to them, causing retention problems.
What other concerns does the delay raise?
More Americans will be accessing federal subsidies for health insurance, but the Internal Revenue Service (IRS) won’t be collecting employer mandate penalty revenue, as originally projected. With less money coming in and more going out, it may impact the ACA’s sustainability.
Originally, the ACA required insurance companies and employers to send an informational return to, for example, the IRS. This was meant to help enforce the individual mandate by offering a secondary source about whether individuals are covered by health insurance. With the delay until 2015, there is no way to match up the employer informational returns with the individual tax returns, which may make the individual mandate more difficult to enforce.
So, what are some next steps for business owners?
In addition to considering whether it’s worth offering coverage even though the penalties won’t start until 2015, you still need to implement complicated procedures that measure how many hours variable employees work on average. Companies need to work on their approach even in 2013, as transitional relief going into 2015 is more unlikely after a one-year delay. You’ll want to get it right the first time.
Mark Haegele is director, sales and account management at HealthLink. Reach him at (314) 753-2100 or [email protected].
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