The message buried in the Administration's stunning decision to delay full implementation of the Affordable Care Act, is this: If you were going to be on the hook for providing insurance to employees next January, you're off the hook for a year. But while the Administration takes a pause to clarify its plans, the delay raises a whole host of new questions. We'll do our best to answer them.
To recap: Late yesterday, an administration spokesperson confirmed that a key requirement of the Obamacare will be delayed for one year: The IRS will not begin to enforce the employer shared responsibility mandate, which requires companies with 50 or more full-time employees to offer affordable health coverage or face penalties, until January 1, 2015.
According to the notification, the stay came out of “a dialogue with businesses” about the complexity of the ACA’s reporting requirements and “the need for more time to implement them effectively.” The additional year is supposed to allow the government to simplify and test systems whereby you would have to provide information about the health coverage you offer -- and to give you more time to adapt your existing health coverage offerings to the ACA's minimum requirements, to avoid paying federal penalties.
Why the delay is necessary
Without a reporting system in place, the notification says, it will be “impractical to determine which employers owe shared responsibility payments for 2014.” Therefore, you won't have to make these payments (read, penalties, or, er, taxes) until 2015. In the meantime, though your are “strongly encouraged” to maintain or expand your employee health coverage.
The IRS notice states that other provisions of the ACA are not affected by this action. That means that modified community-rating rules will still go into effect for small-group health plans starting in 2014, so there is still a possibility that your premiums will change substantially next year. State health-insurance exchanges will still open for business in October. This means that if you qualify as a small business (fewer than 50 employees, or fewer than 100, depending on your state) and you wish to provide insurance, you'll still be able to find guaranteed coverage for your workforce through SHOP exchanges. If you have more than 50 (or 100) employees and don't offer a health plan, your workers still have a place to buy guaranteed individual coverage, with potential government subsidies.
That's the theory, anyway. In practice, benefits experts we spoke with are unclear as to how this will work. It’s unclear for example, how the government will determine if your employees qualify for premium subsidies without knowing exactly what benefits they are already getting from you.
The bottom line: More time to prepare for the inevitable
Predictably, conservative critics are crowing. The National Federation of Independent Business (NFIB) quickly issued a statement saying, “This is simply the latest evidence that implementation of this terrible law is going to be difficult if not impossible, and the burden is going to fall on the people who create American jobs. Temporary relief is small consolation. We need a permanent fix to this provision to provide long term relief for small employers.”
The bottom line is that the delay may make no difference to you at all -- only companies with 50 or more full-time workers are subject to the ACA’s employer mandate, and about 95 percent of such firms already provide health coverage. Still, the additional year offers an opportunity to make sure that you’ve properly figured which of your employees qualify for benefits, and that your company’s coverage avoids potential penalties based on the ACA’s affordability and minimum value tests.
The administration promises more formal guidance on the additional transition year within the next week, and to publish proposed rules implementing these provisions sometime later this summer. But if you were sweating and fretting about 2014, the message going into the holiday weekend is clear: Relax!