Only July 2, 2013, the U.S. Department of the Treasury announced that the Affordable Care Act (ACA) employer mandate—requiring businesses with 50 or more employees to offer their workers affordable health coverage that provides minimum value—will be delayed until 2015. The news caught most observers by surprise, and initial reactions have varied widely. The Treasury notice indicates that the agency expects to publish proposed rules this summer "after a dialogue with stakeholders" aimed at "minimizing" employer reporting requirements and providing "time to adapt health coverage and reporting systems." The proposed rules will provide important information about the long-term implications of the delay, but Manatt has identified a few key takeaways at this point:
- The delay of the employer mandate is welcome news for employers who have raised increasing concerns about the complexity and burden of ACA reporting requirements, especially for the vast majority of organizations that already offer ACA-compliant coverage. A recent Kaiser report shows that 98% of large firms (200 or more employees) offered health benefits in 2012, and 94% of firms with 50 – 199 workers also offered benefits.
- The delay of the employer mandate provides a one-year break for those employers who do not meet ACA requirements. They now have some breathing room to consider their options for extending coverage to more employees, beefing up existing coverage to meet minimum standards, reducing full-time employee head counts to minimize coverage obligations or paying penalties for non-compliance.
- Employers are not likely to reduce coverage during the one-year delay, so employees with coverage today probably will not see any change as a result of the postponement. At the same time, uninsured employees will be able to purchase coverage through the new marketplaces. In addition, if their income is below 400% of the Federal Poverty Level, they will be able to access premium tax credits.
- The delay in implementing the employer mandate does not change tax credit eligibility requirements for employees. To be eligible for a tax credit, individuals cannot have access to employer-sponsored health insurance that meets minimum coverage and affordability standards. The delay in employer reporting requirements should not impede eligibility determinations, since the HHS already issued guidance directing marketplaces to rely on applicants’ attestations about their access to employer coverage. Applicants still will be obligated to provide information about their access to employer-sponsored coverage—and still will need their employers’ assistance with that process. The degree to which employers must cooperate remains an open question.
- It is unclear whether employers will be entitled to—or have an incentive to—appeal their employees’ eligibility for tax credits, given that the employer mandate and its related penalties will not be in place for 2014. It would come as a welcome relief to marketplaces working to establish the employer appeals function to have it deferred for 2014.
While the analysis is ongoing, initial indications are that the employer mandate delay is a "win" for business. More individuals may be eligible for and/or receive tax credits than would have if the mandate went into effect on schedule.
Perhaps the most significant impact of the announcement is the inevitable commentary that will re-ignite skepticism about the successful implementation of the ACA. Proponents of the law are pointing to the Obama Administration's flexibility with large employers and willingness to work collaboratively to get the process right. Opponents are using the chance to criticize the law and question the Administration's ability to implement its major features, including the Marketplace Open Enrollment on October 1, 2013.
Additional guidance and regulations about the employer mandate and appeals process are expected to be released. Manatt will continue to monitor new information and keep you informed as details emerge.