On July 2, 2013, the U.S. Treasury announced that the Obama Administration is implementing a one-year delay of the employer and insurer reporting requirements under the Affordable Care Act of 2010 ("ACA"). As a result, the "shared responsibility" scheduled to take effect January 1, 2014 will be delayed for one year, and the IRS will not assess penalties on impacted employers for failing to offer coverage in 2014. The IRS has indicated that additional guidance will be issued within the coming weeks on the reporting requirements and the delayed effective date.

Although the U.S. Treasury's announced extension of applicable employer "shared responsibility" mandates may feel initially like a welcome reprieve for employers from having to be financially and operationally prepared for the full implementation of the ACA in 2014, the extension should not encourage employers to delay in preparing for other ACA requirements in 2014, because:

  • The Treasury's announcement only extended the deadline for employers with at least 50 full-time employees (defined under the ACA as a "large employer") to offer coverage to qualifying employees under the employer's plan (i.e., the "pay or play rules"). This has no effect on smaller employers and the extension did not address other ACA-compliance deadlines, including the requirement for group health plans to provide "guarantee issue" insurance coverage regardless of any pre-existing medical conditions, or the obligation to impose a maximum 90-day waiting period for coverage by newly eligible employees under the employer's plan.
  • Employers who sponsor self-insured group health plan arrangements will still be required to report and pay by July 31, 2013 all applicable Patient Centered Outcome Research Institute ("PCORI") fees of $1 per covered life as of the plan year ending on or after October 1, 2012. Other ACA-related fees, including the Transitional Reinsurance Fee (for all group health plans) and Health Insurance Premium fee (for fully-insured plans and other "stop-loss" coverage) also remain in effect.
  • The ACA deadline extension has no impact on the small business owner who has fewer than 50 full-time employees; all other ACA-related compliance deadlines remain in effect and these employers will also still have more limited insurance options and be subject to more restrictive insurance underwriting obligations in 2014.
  • Because the new individual health care exchange alternatives are still scheduled to begin open enrollment on October 1, 2013, unless/until further guidance is issued, employers are still mandated to provide employee notification of all health insurance options available to them in 2014 as well (see our prior eAlert on this topic).
  • Although the Treasury previously delayed and extended the separate deadline for employers with fully-insured group health plans to provide coverage in a nondiscriminatory manner, employers need to remain mindful that the IRS could issue guidance during this interim period that will require eligible employees to have the same eligibility and coverage rights as other highly-compensated individuals, so employers will need to continue to plan for this eventuality as well when considering future coverage options.
  • The extended employer deadline does not extend the deadline for individuals to elect some form of coverage in 2014 to avoid the separate individual taxpayer penalty. As such, employers may be inclined to still offer some form of coverage in 2014 to assist their employees in avoiding the impact of these upcoming and separate individual coverage mandates that remain in effect.

What Employers Should Do Now:

While employers may now choose to consider putting off their "pay or play" compliance responsibility for another year, doing so only delays the inevitable. Given the issues identified above, employers should continue to address and resolve what the employer needs to be doing to have more actively-engaged employees to assist in controlling future costs. That said, the extension does provide more time for other open issues to be resolved, such as how employers are supposed to treat and offer coverage to "seasonal employees" and other employees who work less than 12 months per year.

For More Information

We will continue to actively monitor the situation and provide periodic updates to assist in evaluating decision-making opportunities as future guidance is issued.

Topics:  Affordable Care Act, Deadlines, Delays, Employer Group Health Plans, Employer Mandates, Fees, Form 720, Healthcare, Marketplace Notice, Pay or Play, PCORI, Shared Responsibility Rule, U.S. Treasury

Published In: Health Updates, Insurance Updates, Labor & Employment Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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