In a move applauded by employers, on July 2, the Obama administration delayed implementation of the employer health coverage mandate under the Affordable Care Act by one year. The employer “play-or-pay” mandate, which applies to employers with at least 50 full-time-equivalent employees, will require employers to offer affordable health coverage to employees who perform at least 30 hours of service per week, or pay stiff tax penalties. The employer mandate was previously scheduled to become effective January 1, 2014, and is now deferred until January 1, 2015. (Details about the mandate, its penalties, and how to count full-time employees can be found in our January 16, 2013 alert: Prompt action required by employers on health care reform: IRS issues “play or pay” regulations.)
The administration states that this delay is in response to a number of concerns raised by stakeholders, such as complaints about the complexity of the “play-or-pay” regulations issued earlier this year, and the need for more time to implement reporting systems. The administration says it intends to use the one-year delay to revamp and simplify the insurer and employer reporting requirements, and provide employers time to adapt health coverage and reporting systems to comply with the new mandates. The Treasury Department intends to issue transitional guidance within the next week and to publish proposed rules implementing the new insurer and employer reporting provisions later this summer. The administration also encouraged employers to implement voluntary information reporting in 2014 in hopes that real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.
Keep in mind that this limited delay does not affect other provisions of the Affordable Care Act slated to go into effect in or before 2014, such as:
Moreover, as yet, the delay does not affect the individual mandate which requires most individuals to purchase insurance by January 1, 2014, or pay a tax penalty. Therefore, a significant result of the delay may be to increase the number of employees without coverage at work who will purchase individual coverage through a health insurance Exchange. Open enrollment for the Exchanges is still scheduled to begin October 1, 2013. Under the Exchange provisions, lower-income individuals can qualify for a federal subsidy if their employer does not offer health coverage that meets minimum value requirements and is “affordable” when measured as a percentage of their household income.
Pending further guidance from the Treasury Department, employers are faced with a number of considerations:
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