Volume 12, Issue 6
Most employers know that major portions of the health care reform laws enacted in 2010 are scheduled to take effect in 2014. On July 2, 2013 the Obama Administration delayed, for a year, one important piece of those laws.
A key feature of the health care reform laws is the "employer shared responsibility" mandate, often referred to as "play-or-pay" rules. Those rules require "applicable large employers" either to offer "affordable" health coverage that provides "minimum essential coverage" and "minimum value" to their "full-time" employees or risk paying an excise tax.
Here is what those terms in quotation marks mean:
Applicable large employers that fail to offer minimum essential coverage to at least 95% of their full-time employees could be subject to an excise tax if at least one of their full-time employees goes to a state health insurance exchange and qualifies for federally-subsidized coverage from the exchange. The penalty would generally be $166.67 per month multiplied by the number of the employer's full-time employees, minus the first 30 such employees.
Applicable large employers that fail to offer affordable coverage that provides minimum value to their full-time employees could be subject to an excise tax of $250 per month multiplied by the number of the employer's full-time employees that go to a state health insurance exchange and qualify for federally-subsidized coverage from the exchange.
The play-or-pay rules were scheduled to take effect January 1, 2014, with some relief for certain employers with fiscal-year health plans.
What Happened on July 2nd
The Obama Administration delayed the play-or-pay rules for one year, to 2015. Although the Administration's announcement didn't mention it, the delay may have been motivated in part by many states' failure to establish a health insurance exchange, leaving that burden to the federal government.
What It Means for Employers
What Did Not Happen on July 2nd
Health care reform was not repealed. So, a number of mandates still are scheduled to take effect for plan years beginning in 2014, including the following:
In addition, new rules prohibiting discrimination in favor of highly compensated individuals in non-grandfathered, insured medical plans may take effect for plan years beginning in 2014, though that depends on when the IRS issues guidance interpreting the new rules.
What to Do
Employers should continue to prepare for the mandates that are scheduled to take effect in 2014, and for the play-or-pay rules now effective January 1, 2015, but perhaps without the feeling of near-panic a January 1, 2014 deadline engendered.
Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.