Health Care Reform Alert – Employer Mandate Delayed

The Obama administration announced on July 2, 2013, that the “Employer Mandate” provisions of Health Care Reform (“HCR”), which were scheduled to become effective on January 1, 2014, will be delayed for one year. This means that certain employers will not be required to pay penalties until 2015 if the health insurance benefits that they offer to their employees do not meet the requirements of HCR. The Employer Mandate is a major component of HCR and its delay will give employers more time to make decisions about the health benefit packages that they offer to their employees. It will also give the government more time to simplify employer reporting requirements under the law.

Background:  Under HCR, all employers with 50 or more “full-time equivalent employees” will be subject to the penalties if they do not offer a group health plan to their employees or if their group health plan is considered to be “unaffordable” or does not meet “minimum essential coverage” standards. An employer that does not offer any health insurance coverage will pay a monthly penalty equal to the number of full-time employees (i.e., employees who work over 30 hours per week), minus 30, multiplied by $167. The monthly penalty assessed to an employer offering “unaffordable” coverage or coverage that does not meet “minimum essential coverage” standards is based only upon the full-time employees who receive the Premium Assistance Credit, not FTEs. For every such employee, the monthly penalty is equal to $250.

What does the delay mean for Employers?  Employers that are subject to the Employer Mandate will have an extra year to analyze how best to structure their health insurance benefits to minimize additional cost to their company. In addition, employers with part-time and/or variable hour employees will have an additional year to put systems in place to count the hours worked by those employees for the purposes of offering health insurance coverage or calculating the penalty amount.

What’s next? HCR is still in place. Several other provisions of the law will become effective in 2014 including the “Individual Mandate” which requires individuals to have health insurance coverage for themselves and their dependents or pay a penalty. The state health insurance exchanges are also scheduled to open for business on January 1, 2014. Certain requirements for group health insurance arrangements will also kick in in 2014, including prohibitions on waiting periods in excess of 90 days and annual caps on deductibles and out-of-pocket maximums.

If you have questions about how HCR will affect your business, please feel free to contact a member of the Employee Benefit Group.