On July 2, 2013, the Treasury Department made an announcement of transition relief for 2014 under sections 6055 (Reporting of Health Insurance Coverage by Individual), 6056 (Large Employer Health Coverage), and 4980H (Employer Shared Responsibility Provisions). Most have termed this transition relief a “delay”; some choose to call it “non-enforcement.” Regardless of the terms used, the announcement brought a huge sigh of relief from many employers given that there is now no penalty. But many substantial and critical provisions of the ACA will still be effective on January 1, 2014.
The released notice stated that employers only have to VOLUNTARILY comply with the reporting requirements under sections 6055 and 6056 of the code, and that reporting will begin in 2015. It also stated that employers will NOT be subject to any tax penalties under the employer mandate, section 4980H, until 2015. This transition, however, DOES NOT DELAY the following:
- • Individual Mandate: This is a statue that requires all Americans to have health insurance coverage or face a penalty ($95 or 1% of household income in 2014).
- • Transitional Reinsurance: This is a fee due on all self-insured plans and insurance companies to fund risk adjustments and risk corridors for plans in the individual market (2014 to 2016). For 2014, this fee is $63 per covered life (“belly button”), or $5.25 per life, per month.
- • PCORI: This is a fee due on all insurance plans to pay for comparative clinical effectiveness research under the Patient-Centered Outcomes Research Institute (2012 to 2019); $1 per covered life for plan years ending before October 1, 2013, and $2 for all covered lives for all plan years ending after October 1, 2013.
- • Wellness Programs: Employers are allowed to implement a 30% premium differential for participation in wellness programs (up to 50% for tobacco cessation).
- • Insurance Product Reforms: No annual or lifetime limits and no co-pays are allowed on preventive services on any plans offered as of January 1, 2014.
- • Exchange Communication: By October 1, 2013, all employers must provide all employees with information about coverage in the state and federal exchange/marketplace, including notification of the employer plan offer being affordable and of minimum value.
- • 90-day Waiting Period: Under the ACA, an employer may not have a wait period longer than 90 days before enrolling an employee in coverage.
This transition relief leads to financial relief for employers, but it does not solve any of the issues that are an administrative burden to the employer benefits process. The transition relief makes one wonder how the employee will be affected. It has been stated that this “delay” allows an employer to offer unaffordable coverage because no penalty will be assessed. According to the Treasury statement, all individuals will continue to be eligible for the premium tax credit by enrolling in a qualified health plan through the Affordable Insurance Exchanges if their household income is within a specified range and they are not eligible for other minimum essential coverage, including an eligible employer-sponsored plan that is affordable and provides minimum value.
As of mid July, no guidance on the delay has been released, and there has been no mention of an expected date for additional guidance other than the fact that agencies want to get immediate feedback on reporting capabilities and needs from employers. The transition relief announcement has only enhanced the already politically charged environment around implementing the ACA. A great deal of posturing is occurring, and many organizations and coalitions are trying to educate Congress on the impacts of the ACA and this transition on the business community.
So the sigh of relief has now led to the questions, “Should we use this year to practice, prepare, and move forward with what we have already accomplished in preparation, or should we stop and institute whole sale change in 2015 when the government demands we comply?” And, “Given this transition, should we or can we expect more legislative changes?” Good questions with many potential answers. While no penalties are being assessed this year, employers still must comply with the underlying design requirements. It is imperative that employers know what they are challenged with on a prospective basis. Being prepared from a cost perspective will ensure senior management, shareholders, and employees are educated and ready for 2015. Until more is known—and the government seems to be full of surprises—anything is possible.