The Obama Administration announced on July 2, 2013, that it will provide an additional year before the ACA reporting requirements apply to employers and insurers who provide group health plans, and before the employer shared responsibility penalties will apply (because without the reporting requirements, it would be impossible to determine which employers would be subject to the penalties). Employers initially rejoiced, but now some have retreated to cautious optimism and others allege the delay is primarily intended to help the Democrats in the upcoming mid-term elections. Whatever the reasons for the one-year delay, the ramifications of it are important for employers who sponsor group health plans (and for those who don’t currently but would have faced potential penalties if they did not start offering coverage in 2014).
This article briefly lists those provisions of the ACA that are delayed and those that are not. Many unanswered questions remain, despite the 3-page guidance issued by the IRS on July 9 (Notice 2013-45), so this list is just a starting point for employers who are working on their strategy for next year. Additional formal guidance is expected soon, since the original July 2 announcement said: “Within the next week, we will publish formal guidance describing this transition.”
What IS delayed?
- Requirement to offer “minimum essential coverage” to at least 95% of full-time employees
- Need to offer “affordable” coverage to full-time employees
- Need to offer coverage that provides “minimum value” (60%)
- Requirement that 30 hours/week is “full-time” for health benefits
- Need to track hours of “variable hour” employees to determine if they are full-time
- Concern whether “client employer” or staffing agency is the “common law” employer and liable for penalties under Employer Mandate
- Need to track data for reporting requirements
What is NOT delayed?
- Taxes and fees: PCORI fee, Transitional Reinsurance Fee, Health Insurance Industry Tax
- Maximum 90-day waiting period (maximum 60-day in California)
- Limits on deductibles ($2,000/$4,000) and out-of-pocket maximums ($6,350/$12,700)
- No pre-tax limits, no annual dollar limits on “essential health benefits” (EHBs)
- New Wellness program rules
- Requirement that small insured plans (both in and outside the Marketplace/Exchange) must cover “essential health benefits” (EHBs), meet one of four “metals levels” of actuarial values (60%, 70%, 80%, or 90%, within two percentage points), modified community rating, guaranteed issue and renewal
- Medical loss ratio (MLR) requirements, and rebates if MLR requirements are not met
- Required distribution of Summaries of Benefits and Coverage (SBCs)
- Required distribution of Exchange Notices by October 1, 2013
- W-2 reporting of health care costs
- Individual Mandate – and taxes on individuals who do not have “minimum essential coverage”
- Subsidies for qualifying individuals who buy health insurance in the individual Marketplaces
Some Unanswered Questions
Some of the following questions may be addressed in future guidance, but others will be answered only as the implementation (or non-implementation) of the Affordable Care Act unfolds, and will depend on what actions are taken by employers, employees, and the Marketplaces.
- Will the effective date of the Health Insurance Marketplaces also be delayed? How much money might the federal government save if federal Marketplaces were delayed for six months?
- Will the effective date of the Individual Mandate be delayed?
- If not, will employers send more employees to the Marketplaces?
- If they do, will this improve the risk pool in the Marketplaces, and will this reduce premiums for 2015?
- In 2014—for all practical purposes—will eligibility for subsidies be based only on household income and legal status, and not on availability of affordable employer-provided coverage that provides at least minimum value (since it’s not clear how this will be monitored without the reporting requirements)?
- In 2014, will low-income families qualify for subsidies in the Marketplaces, even if employer-provided coverage is available that meets the employee-only cost of coverage threshold?
- Will employees who buy coverage in the Marketplaces in 2014 decide Marketplace coverage is better and less expensive than employer coverage?
- How will subsidies in the Marketplaces be funded? Projected revenue from the Health Insurance Industry Tax is $8 billion, but projected cost of subsidies in 2014 was projected (before the July 2 announcement) to be $23 billion. ACA funding is based partly on revenue from employer penalties, but there won’t be any employer penalties in 2014.