June 11, 2014
The deadline is rapidly approaching for large employers to offer ACA-compliant health plans to employees, or pay a penalty. In turn, employers are trying to decide what to do.
The issue has been raised of whether employers can “offload” employees to the Health Benefit Exchanges, then reimburse employees for any out-of-pocket premium costs. In this way, employers could “tap into” individual subsidies to help underwrite their plan costs.
However, the “offload” strategy has been rejected by the federal agencies involved. Employers that make use of this strategy may be fined up to $3,000 per employee. The Internal Revenue Service (IRS) has issued applicable regulations (IRS Notice 2013-54). The Department of Labor (DOL) has issued a similar notice (DOL Technical Release 2013-03).
Conforming guidance by the Department of Health and Human Services (HHS) is to be issued in the near future.
The large-employer mandate is scheduled to go into effect in 2015 (for employers with 100 or more employees) and in 2016 (for employers with 50 to 99 employees).
Implementation for all of these employers was initially scheduled for 2014, but was postponed due to complaints by employers that they were not ready for the new requirements, and preoccupation by HHS with starting up the federal Exchange for individuals in 2014.
Small-business employers (with under 50 full-time equivalent employees) are not covered by the mandate, and can choose not to participate, without penalty.
Large employers will have to pay a penalty of $2,000 per employee starting in these years, if they do not offer a Health Plan that meets ACA requirements.
Even though larger employers will be covered by the mandate in 2015, they will only have to arrange for at least 70 percent of employees to be covered during this initial year, with 95 percent to be covered in future years.
In 2013, HHS clearly made a decision that working with individuals and the Exchanges was the overriding concern of the moment. What was needed, then, was a way to place employers into a temporary “parking” mode until their issues could be resolved.
It was reasonable for HHS to estimate that, by and large, these employers would still maintain their existing group plans for another year, so that postponing the mandate would not lead to long-term damage to ACA implementation.
During 2014, large employers continue to be actively involved in implementation of the ACA. They are dealing with employee-related issues as they prepare for the mandate.
Pressure is rapidly building as 2015 approaches.
Where the initial enrollment phase was all about trying to make the Exchanges work and bringing in individuals to enroll, the second phase promises to center around responses by larger employers to the ACA requirements.
And, at the same time, there are continuing problems with Exchange operations—calling for more software design work, the resolving data errors, and bringing in hard-to-reach enrollees who did not sign up during the first round of enrollments.
It is too soon to decide if the Small-Business Health Options (SHOP) program for small-business employers can be made operational for 2015.
Implementation of the ACA did not “take place” during the October, 2013 to March, 2014 period. This was only the first publicly-visible move in a long process that will continue over years.
The 2014-2015 enrollment period is likely to be just as filled with crises and political disputes.