Cost-Sharing (Reductions), Employee Benefits Compliance, Employer Mandate, Exchanges / Marketplaces / Subsidies, Nondiscrimination Rules, Penalties

Delayed ACA Provisions

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There’s a lot of talk these days about what provisions have been delayed and what provisions should be delayed, and why certain provisions won’t be delayed even though some people think they should.  So, here’s a quick rundown of what has been delayed.

1.  Large Employer Mandate

(aka “Employer Shared  Responsibility” or “Play-or-Pay”)

What it is:  Large employers are subject to potential penalties if they do not offer health coverage that is “affordable” and provides “minimum value” to at least 95% of full-time employees.

Delay:  This has been delayed to 2015.  The original effective date was the first day of the 2014 plan year.  Technically, what has been delayed to 2015 is the information reporting requirements, and this effectively delays the penalty also (because the information is needed to determine if the penalty applies).  The practical effect is that the Employer Mandate generally is delayed one year, although the government urges large employers to comply voluntarily.  IRS announced the delay in Notice 2013-45.

The Notice did not say how the delay applies to any of the transition rules in the proposed regulations.  Thus, it’s not clear if non-calendar year plans that met the transition rule (delaying the effective date to the first day of the 2014 plan year if certain criteria are met) are delayed to the first day of the 2015 plan year, or only to January 1, 2015.  Until we hear otherwise, it is safest to proceed as if all plans must start complying by January 1, 2015.

 2.  Out-of-Pocket Maximum

 What it is:  The out-of-pocket (OOP) maximum in 2014 will be $6,350 for individual coverage and $12,700 for family coverage, for all non-grandfathered plans of any size.

Delay:  This has been delayed for one year (to first day of 2015 plan year) for some plans, but not for all plans.  The general effective date is still the first day of 2014 plan year.  The delay was announced in the ACA FAQs Part 12.

The delay only applies to plans that utilize multiple service providers to administer benefits (e.g., separate TPA for medical, and Pharmacy Benefits Manager for Rx).  Such plans can have separate out-of-pocket maximums for prescriptions and medical for the 2014 plan year only, IF:

  • the out-of-pocket limit ($6,350/$12,700) is met with respect to major medical (even if not also for Rx or pediatric  dental), and
  • to the extent the plan has a separate out-of-pocket maximum on coverage other than major medical (e.g., prescription drug coverage), such out-of-pocket maximum does not exceed the dollar amounts noted (i.e., $6,350/$12,700)

However, plans cannot impose an annual out-of-pocket maximum on medical/surgical benefits and a separate annual out-of-pocket maximum on mental health and substance use disorder benefits, because this is prohibited by the Mental Health Parity and Addiction Equity Act (MHPAEA).

3.  Federally-Facilitated SHOP Exchanges (Marketplaces)

The Small Business Health Options Program (SHOP) is not delayed, but several features of it are:

  1. Employee Choice Option in SHOP exchanges, and
  2. October 1, 2013 online enrollment date.

1) The “employee choice option” is delayed to 2015.  This is the employer’s option to select one metal level and allow employees to enroll in whichever carrier or policy option they want at that level. Until 2015, employees will not have the opportunity to enroll in whatever carrier or policy they want.   The only option will be the carrier and policy selected by the employer.

2) October 1, 2013 online enrollment date.  Online enrollment in federal SHOP exchanges is delayed one month – until November 1, 2013, due to technical difficulties.  Phone and in-person enrollment is not delayed, but begins October 1.  This delay was announced in a September 26, 2013 HHS Press Release, which also delayed the Spanish-language online individual enrollment by one month.  (Coverage is not effective until January 1, 2014, regardless of type of enrollment, so long as enrollment is by December 15, 2013.)

These delay provisions do not apply to state-facilitated exchanges, but only to federally-facilitated exchanges.

4.  Auto Enrollment

What it is:  This is the requirement that employers with more than 200 full-time employees must automatically enroll eligible employees in the group health plan.  Employers must give employees adequate notice and sufficient time to opt out.  These provisions are in section 18A of the Fair Labor Standards Act (FLSA).

Delay:  It was not clear under PPACA what the original effective date was, but it has been delayed until regulations are issued, and the government guidance issued February 9, 2012 (Q/A 1), says it will not  be effective until 2015 at the earliest.  (http://www.cms.gov/CCIIO/Resources/Files/Downloads/employer_faq_bulletin_2_9_12_final.pdf)

5.  Nondiscrimination Rules

What it is:  This provision will apply non-discrimination rules to insured health plans.  The rules will be similar to existing rules under IRC Section 105(h), which currently applies to self-funded group health plans.  The nondiscrimination rules generally prohibit plans and sponsors from discriminating in favor of “highly-compensated employees” in terms of eligibility and benefits.

Delay:  IRS Notice 2011-1 (issued in late December 2010) delayed the enforcement of the nondiscrimination provisions until the first day of the plan year beginning “a specified period after issuance” of regulations or other administrative guidance.

6.  W-2 Reporting of Health Care Costs

What it is:  This provision requires employers to include on employees’ W-2 forms the cost of employer-sponsored group health plan coverage provided in the prior calendar year.

Delay:  This requirement is not delayed for employers who issued at least 250 W-2s in the prior year.  It is only delayed for smaller employers that issued fewer than 250 W-2s for the prior year.  Once future guidance is issued, small employers will have to comply as of the first calendar year that begins at least six months after the guidance is issued.  See Q/A 2 on the IRS webpage.

Additional Note:

The provision that many people think also should be delayed is the Individual Mandate, which provides that individuals who do not have or purchase health coverage in 2014 will be required to pay a tax penalty.  The argument as to why the individual mandate should be delayed one year is that the government has delayed the Large Employer mandate one year, so should do the same for the individual mandate.  The argument as to why it will not be delayed is because the adverse selection in the new exchanges/marketplaces would be too great without the individual mandate.  This is because unhealthy people who want insurance and have not been able to buy it in the past will certainly enroll for coverage even without the individual mandate, but young healthy people who have not previously had insurance are very unlikely to enroll.  It is believed the mandate will incent some of the young healthy people to enroll for coverage.

Delayed ACA Provisions [PDF]