In a posting yesterday on its website, the Department of the Treasury (Treasury) announced the postponement until 2015 of the following requirements under the Act that were set to take effect in 2014:

  • The obligation of applicable large employers to offer healthcare coverage to their full-time employees or pay penalties under Section 4980H of the Internal Revenue Code (Code), commonly known as “play or pay” (POP). See our FAQs on POP (which were written before the Treasury announcement). An “applicable large employer” is one employing an average of 50 or more full-time employees on business days during the preceding calendar year. Members of a controlled group are treated as a single employer in determining whether the 50 full-time-employee threshold is met. A “full-time” employee is one who, as to a month, is employed on average at least 30 hours per week.
  • Information reporting under Code Section 6055 to the Internal Revenue Service (IRS) by insurers, self-insuring employers and other parties that provide “minimum essential coverage” to an individual under the Act.
  • Information reporting under Code Section 6056 by applicable large employers to the IRS and to their full-time employees as to what healthcare coverage is offered to such employees.

The Treasury also said that it would publish formal guidance as to the postponement within the next week.

The postponement raises a number of issues:

  • Without information reporting to the IRS, it may be difficult for it to enforce the requirement in the Act for most individuals to maintain healthcare coverage beginning in 2014 or pay a penalty (the so-called “individual mandate”).
  • Waiving the 2014 POP penalties on applicable large employers but maintaining the individual mandate penalties for that year may be a hard sell politically. On the other hand, if the individual mandate were also waived for 2014, fewer young, healthy individuals might choose to purchase healthcare coverage for that year through the insurance exchanges being established under the Act, and this could drive up the premium costs for others who do purchase such coverage. Higher-than-expected premiums for coverage bought through the exchanges are already a concern.
  • Individuals will still be able to obtain tax subsidies to help pay for coverage purchased through the exchanges. Without the POP penalties, applicable large employers may be less willing to offer minimum essential coverage to a broader group of employees than in the past. This, in turn, would mean that more individuals would qualify for tax subsidies because they would not have been offered the opportunity to obtain minimum essential coverage from their employers.
  • The Treasury announcement does not affect the requirement under Section 1512 of the Act for employers to notify their employees of their coverage options, including as to the existence of the exchanges. The Department of Labor has issued temporary guidance on this notice requirement; see our WorkCite article.
  • It is too early to predict whether this postponement will affect provisions that take effect in later years, primarily the penalties for so-called “Cadillac” health plans beginning in 2018.