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Know How the Health Care Reform Mandate Delay Impacts your Business

Although this summer's surprise IRS announcement of a one-year delay in penalty enforcement of the employer mandate under the Patient Protection and Affordable Care Act (PPACA or ACA) has been greeted by some employers as welcome news, HUB International cautions against complacency.

"While it may seem like employers have been given a major reprieve, we urge our clients to continue to develop and implement their long-term strategy," said Joe Torella, National Practice Leader, Employee Benefits, HUB International. "Some requirements have been pushed back, but much work remains in order to adequately prepare for 2014 and beyond. There are several provisions that employers can take advantage of to better manage the quality and cost of their employee benefits program," he said.

What is Delayed 

The IRS announced a one-year delay for employer penalties associated with health care reform as well as a similar delay for employer reporting requirements regarding employee health plan coverage. These delays effectively mean the employer mandate to provide health insurance coverage to their employees or pay a penalty will not take effect until 2015.  The announcement affects employers with 50 or more full-time employees.  (Note:  Special counting rules apply to measure 50 workers that may unexpectedly draw additional companies under the mandate.)

The delay will give the government time to fine tune enforcement practices once the mandate takes effect.  The delay also offers employers more time to understand and comply with the complex reporting requirements, including the controversial "measurement" rules needed to assess full-time employment status.  The IRS, DOL and HHS are expected to issue additional guidance.

What is Not Delayed 

Most ACA provisions are moving forward as scheduled for 2014, including the individual mandate, , health insurance carrier regulation (which dramatically affects rate calculation, especially for smaller employers), Exchange notifications, wellness rules, preventive benefit coverage, numerous plan design changes and online exchanges.

Be prepared for 2014 changes 

What are the crucial next steps to prepare for 2014?  According to Dennis Fiszer, Chief Compliance Officer, Eastern Region, HUB International, establishing a reporting mechanism in preparation for 2015 should be at the top of the priority list for most employers. 

"When it comes to tracking hours worked, it's important to get precision around collecting your data," he said. "Preparing systems to track hours as soon as possible helps an employer achieve two results. First, the employer sharpens its ability to project costs associated with coverage once the mandate goes into effect.  Secondly, it will establish a stronger paper trail documenting full-time, part-time, variable-hour or seasonal status. The more substantial and precise the paper trail, the easier it will be to show that no employee was arbitrarily shifted into an inappropriate category so as to side-step a compliance obligation."   

In addition, HUB International recommends that employers understand and prepare for the following:

  • Expect to see rate compression in full effect by 2014. Small businesses with younger, healthier workforces will likely see an increase in their premiums.  Industries with generally healthier employees will no longer receive premium discounts.
  • Understand that comprehensive elimination of pre-existing conditions will impact pricing on fully insured plans.  Insurers are concerned and will adjust their rates accordingly.
  • Continue building and enhancing your company wellness program with a view to moving toward an outcomes-based model, if you are not already doing so; take advantage of the financial incentives defined in the law - thus aligning employee engagement with those incentives.
  • Consider self- insurance as an alternative to fully-insured plans.  Even smaller employers may be able to manage their program costs more effectively under this strategy.  
  • Be prepared to make ongoing plan design changes.

 "The ACA has not been repealed and we consider that scenario to be highly unlikely," said Fiszer.  "If your broker is telling you to relax and take a break as a result of this announcement, I would suggest that you have the wrong broker. You need to continue down the path of preparation and planning."