|From the National Association of Health Underwriters, 7/4/13:
The Department of the Treasury announced late yesterday that the Obama Administration intends to delay the application of the health reform law’s employer shared responsibility payments (aka employer mandate penalties, not the mandate itself) until 2015. Furthermore, information reporting by employers and health insurers regarding employer-sponsored coverage relative to the individual mandate and pay-or-play reporting will not be mandatory until 2015.
What this means is that the IRS will not assess employers penalties for failure to offer coverage in 2014 or for coverage mistakes in 2014. It seems that the earliest an employer could receive a coverage penalty would be 2015, with payments presumably due in 2016. NAHU has issued a press statement and our counsel, Washington Council Ernst and Young, has also prepared an alert on the change.
The blog post from the Treasury Department states that formal guidance on implementation of the delays will be issued in the next week, which is great news because more information is certainly needed. The announcement issued yesterday was certainly dramatic and perhaps even a little exciting to all of us health-policy nerds out there, but it’s also fairly vague and raises many questions.
On one hand, NAHU and our coalition partners have been asking for more robust transition relief for employer requirements since the get-go. While we have always pursued a legislative track of working toward substantive changes in the employer-mandate requirements, on the regulatory front we have consistently asked the Administration for more time, simpler requirements and enforcement relief. NAHU has had longstanding concerns that employers attempting to comply with very complex requirements that differ significantly from time-tested benefit and employment practices on very short notice could be penalized for inadvertent violations. As such, we are pleased that the Administration has acknowledged the need to provide transition relief and we hope the extra time will allow businesses recovering from the economic hardships of the past five years to make sound business decisions to comply with the health reform law’s requirements without fear of significant financial penalties in the first year of changed operations.
On the other hand, we are sure that all of you who are helping employers large and small comply with this new law are being besieged with questions about what this hoopla really means. First and foremost, can we all stop counting employees right now, relax for a year and then start back up with all of this next summer? Or should we all just enjoy the fireworks and a quick celebratory cocktail or cupcake this weekend, then get right back to work because the IRS will require employers to take reasonable compliance steps over the coming year and employers will still need all the help they can get from their licensed benefit professionals? No one is sure yet, but we are considering the last few sentences of the Treasury blog post as a clue. The Administration very clearly states: “During this 2014 transition period, we strongly encourage employers to maintain or expand health coverage. Also, our actions today do not affect employees’ access to the premium tax credits available under the ACA (nor any other provision of the ACA).”
We’re also wondering how this announcement will impact existing transition relief provided under the proposed employer shared-responsibility rules, and if there will any further transitions to make the path into 2015 smoother. As a reminder, we already have transition relief for employers contributing to multiemployer plans, for those that do not yet fully offer dependent coverage and for those who have off-calendar plan years. This is just a guess, but we are thinking that by giving 2014 as a transition year, the Administration will be fairly serious about penalties and will want to move forward with all of the shared-responsibility requirements right away in 2015.
Another concern many NAHU members have raised is how this announcement will impact exchange enrollment and distribution of exchange-based subsidies in the year ahead. While the blog post clearly states that distribution of exchange-based premium tax credits will be unaffected by the delay, it also said that other provisions of the law remain unchanged. Therefore, if individuals have a valid offer of affordable and minimum-value employer-sponsored coverage, they will technically not be qualified for exchange-based individual subsidies when exchange coverage is issued in 2014. Given the large number of bigger employers that offer coverage today to employees, and given our guess that the Administration will still require at least a good-faith effort for employers to comply with the mandate’s provisions over the course of the next year, we’re not sure how the proposed delay will influence employer behavior. However, the guidance expected in the coming week could help make a more accurate prediction.
Finally, there are lots of provisions of the law that relate to the employer-mandate requirements and reporting requirements, but aren’t contingent on them. Until we hear otherwise, those requirements and provisions of the law continue on unaffected. Provisions and requirements we believe this announcement does not impact include:
Individual mandate. Presumably, the IRS will monitor compliance with the individual mandate through self-certification on each individual’s tax return.
The law’s health insurance market reforms that go into effect as of the first day of the plan year that begins in 2014. For example, these reforms include rating changes in the individual and small-group markets, out-of-pocket limits for all markets, annual and lifetime limits, prohibitions on waiting periods of more than 90 days for all plans and many more. This chart identifies those reforms and whether they are applicable to all plans or just non-grandfathered plans.
Health insurance exchanges. Pending further notice, open enrollment is still expected to begin on October 1, 2013, for all state-based, partnership and federally facilitated marketplaces.
The marketplace notice. Unless the Administration issues an additional delay, all employers subject to the Fair Labor Standards Act (not just PPACA’s employer-mandate provisions) are required to send a marketplace notice to all employees by October 1, 2013. Also, the plan affordability/minimum-value information required to be provided in the notice is still required. Affordability/minimum value are not concepts limited to the employer-mandate provisions of the law—they are concepts relevant to ANY employee (part-time, full-time, temporary, seasonal, etc.) of ANY employer (regardless of size) who is eligible for employer-sponsored coverage and who wishes to apply for a subsidy in the exchange.
Summaries of Benefit and Coverage. Unless we receive additional guidance that indicates otherwise, the notices for the coming plan year must include information about whether or not a plan meets the minimum-value or minimum-essential-coverage standards. These standards relate to the employer-mandate provisions in the law, but they aren’t limited to it, and the SBC requirements, which apply to all plans, are also generally unaffected by yesterday’s announcement.
PCORI fee. The first payment of this fee is due by July 1, 2013, if you have a calendar plan year or a plan year that ended in October or November of 2012. For fully insured plans, the issuer will pay this fee, but for self-funded arrangements or plans that include both a fully insured and self-funded component, the payment responsibility lies with the employer.
The transitional reinsurance fee and the new national health insurance premium tax. Both will be built into 2014 premiums. Other new taxes, like the medical device tax and pharmaceutical tax, will also continue and impact coverage costs.
W-2 reporting requirements. These still apply for employers that issue more than 250 W-2s.
The expiration of annual limit waivers for certain limited medical benefit plans. This type of group coverage may not continue after January 1, 2014.
The limit on health FSA salary reductions.
NAHU will continue to provide you with the latest information about how this change to the law’s implementation will impact employer-sponsored benefit plans as soon as additional guidance becomes available. Furthermore, we have changed the focus of our July compliance corner webinar to address these requirement changes. If you have not registered already, you can sign up here for the free one-hour webinar, featuring Anne Phelps of Washington Council Ernst and Young, to be held on Thursday, July 11, at 1:00 pm Eastern. The session is limited to 1,000 participants; if you can’t make it or it fills up, the session will be recorded and the slides and webinar recording will be posted online in the members section of our website by July 12.