Delay of employer mandate adds twist in PPACA
The complex entity that is the Patient Protection and Affordable Care Act has been altered again.
The last major upheaval on the health care reform front was just over a year ago, when a much-watched U.S. Supreme Court ruling made Medicaid expansion optional for states.
This latest set of changes, by contrast, came without preamble or fanfare and in a holiday week.
Last Tuesday, the U.S. Department of the Treasury posted an announcement that the employer mandate would be delayed a year, to 2015. Last Friday, the Centers for Medicare & Medicaid Services released final regulations indicating that, for 2014, the honor system could replace some employer verifications in the health insurance marketplaces.
Eric Beittel of Enders Insurance Associates in Lower Paxton Township said these announcements in themselves are of smaller import than last year's decision, but they may indicate weighty developments.
"On a scale of 1 to 10, the SCOTUS ruling was a 9 and this announcement is a 4," Beittel said. "However, it is one more piece of evidence implementation is not going well. If the U.S. Department of Health & Human Services fails to get the federal exchange (aka marketplace) up and running smoothly, it will be a 9."
Only companies with 50 or more employees will be required to provide affordable and adequate health insurance to full-time-equivalent employees or pay penalties under the mandate. But the definition of FTE was set lower than many employers currently offer benefits at — roughly 30 hours a week — and so those businesses and nonprofits faced significant calculations and strategic decisions.
With the mandate's original 2014 deadline looming, time was growing short and some organizations already had plans underway to handle the changes. When news of the delay broke, employer reaction was generally positive.
"This is great news for employers impacted by the shared responsibility provisions (of the employer mandate)," said attorney Steve Kern, chairman of the employee benefits group at McNees Wallace & Nurick LLC. "Employer frustration with the shared responsibility provisions has grown louder during the one year since that decision as employers tried to deal with the complexity of the law and the costs associated with compliance."
Eric N. Athey, Kerns' colleague and co-chairman of labor and employment, said MWN has many clients for whom compliance will not be much of a challenge, but several industries and their employees could really be hurt by certain provisions of the law, particularly the 30-hour issue.
"Hopefully, the feds will use the additional year to provide relief for those industries," Athey said.
Aji Abraham, senior vice president of business development for Susquehanna Township-based nonprofit insurer Capital BlueCross, said that, for companies that have already started their mandate compliance plans, the one-year delay is not a lot of reason to change course.
His colleague, Ben Faesel, senior manager of health care reform, noted that the one-year reprieve from employer reporting requirements, which had been and remain unclear, is a bigger deal for some companies than the employer mandate.
As for how the move affects insurers, Abraham said they're still processing the news, but he expects it will inspire another look at their product offerings to make sure they're a good fit for the altered conditions.
The delay does not apply to the individual mandate, coverage offered on the new insurance marketplaces or the sweeping changes in insurance regulations still set to hit Jan. 1.
"Employers who were considering dropping coverage are celebrating the time extension," said Matthew Scott, senior vice president of Pittsburgh-based HDH Group's Lemoyne office. "Many who were continuing to offer credible group coverage view the delay as a non-event and still have the same challenges ahead of them: finding affordable coverage."
Mercer, a global consulting company that is a subsidiary of Marsh & McLennan Companies, pointed out another wrinkle in the development: The mini-med limited coverage plans that many companies offered low-wage employees may not be offered after the end of the 2013. That means the delay may create a gap year for employees currently enrolled in those plans.
In a similar vein, Rich Umbdenstock, president and CEO of the American Hospital Association, released a statement calling the delay troubling.
"The goal of the ACA was to extend coverage to the uninsured, which required a shared responsibility from all stakeholders," Umbdenstock wrote. "We are concerned that the delay further erodes the coverage that was envisioned as part of the ACA."
Then there's the issue of the health insurance marketplaces that are supposed to open Oct. 1 and offer subsidies to those who are below 400 percent of the federal poverty level and don't have affordable, adequate employer-provided coverage. One longstanding questions of the PPACA has been whether large employers will drop their health plans, pay the penalty and send employees to the exchanges.
With those penalties off the table for a year, Beittel said, some companies may view 2014 as an opportunity to cancel their group coverage and "kick the tires" of the marketplace.
Critics of the delay also note that it means a year of lost penalty payments for the government. They advance a similar argument on news that the marketplaces have been given permission to accept marketplace applicants' reported income levels without verification for 2014 and that states running their own marketplaces have leeway to forgo much verifying of employer-provided coverage for 2014.
"This policy has the potential to cost taxpayers tens of billions of dollars of waste, fraud and abuse," Scott said.
Mandate wasn’t expected to shift many in employer-based insurance
In May, the Congressional Budget Office released an estimate of the effects of the Patient Protection and Affordable Care Act on insurance coverage.
The estimate showed no employer penalty payments under the mandate in 2014 but put the figure at $10 billion for 2015, presumably as the 2014 penalties were collected.
It also showed minimal change in employer-based coverage in 2014, with no more than 500,000 people nationally expected to acquire or lose employer-based health insurance coverage as a result of the law as it then stood, including 2014 implementation of the employer mandate.
In subsequent years, CBO projected modest losses for employer-based coverage as a result of the law, with losses projected at 2 million in 2015 and increasing to 7 million in 2018.
According to the Kaiser Family Foundation, which does an annual survey on the subject, 95 percent of employers with 50 or more workers offered health benefits in 2012.