White House Calls Time Out On Key Health Reform Provision
Until the middle of last week, some companies were facing a tough question of whether to offer health insurance benefits to their employees or pay the financial penalty for not doing so.
But the White House last week postponed implementation of that key piece of the federal Affordable Care Act (ACA), set to take effect Jan. 1 2014, by one year. The now-delayed provision will require businesses with 50 or more employees to provide affordable health insurance to workers that meets minimum coverage standards, or pay penalties for uninsured employees, with exemptions for the first 30.
According to a blog post published July 2 by Valerie Jarrett, a senior advisor to President Obama, postponing the penalties will give firms more time to establish systems to collect requisite data on employee access to health care coverage to be reported to the federal government, which will be used to determine penalties. Jarrett said the Obama administration will work with employers, insurers and experts to propose a "smarter system" to collect the data.
Jeannie Hebert, president of the Blackstone Valley Chamber of Commerce, welcomed the one-year delay. Hebert said the business community has struggled with the ACA reporting requirements because they don't address important nuances. For example, Hebert said a company may be penalized for not issuing coverage to employees who decline it in favor of another plan, like one offered by a spouse's employer.
"There's all kinds of little things like that within the ACA that really will cause a problem for the little guy," Hebert said.
Hebert believes that the ACA, which was designed to make insurance more affordable for citizens, will create a bigger cost burden for companies. She expects insurance companies to raise their rates as they take on more risk under universal coverage. With the government delaying the penalty and reporting requirements for a year, Hebert said she hopes the administration will give the law a second look.
"This is a learning curve for everyone, so we really need to step back, take a look, see what changes need to be made, and think about what this is going to do to the economy," Hebert said.
The delayed ACA provision prompted some companies to examine the health insurance benefits they offer employees and whether those firms need to make changes to comply, or whether it's more economically feasible to pay penalties.
Play? Or Pay?
Many firms are evaluating whether to "pay or play" under the new system, weighing a $3,000 per-full-time-employee fine against the cost of benefit plans that meet affordability guidelines, according to Jack Myers, vice president and benefits consultant at Benefit Development Group of Worcester.
"I think employers are really, many of them, on top of coming to grips with the pay-or-play issue," Myers said, adding that he believes most companies will opt to play, offering revised insurance plans all employees can afford, rather than pay penalties and send employees to health insurance exchanges, such as the Health Connector in Massachusetts, to purchase health insurance on their own.
John McMorrow, a benefits attorney with Worcester-based Mirick O'Connell, said there are two ways employers can "get whacked" under federal health care reform laws. While some could face the $3,000 penalty, others, who fail to offer any insurance to full-time employees who work at least 30 hours a week, could be fined $2,000 per employee, though a company's first 30 are exempt.
McMorrow noted that until now, many Massachusetts companies have been offering coverage only to employees who work at least 35 hours a week.
"And that's an eye-opener for a lot of people," McMorrow said.
But there are misconceptions about federal health care reform, and McMorrow said it's important for owners of small businesses to remember that federal penalties apply only to companies with at least 50 employees.
With the delay in the penalty and reporting requirements, McMorrow believes the government has taken a positive step toward simplifying the process for the private sector.
"To me, this is good government and I hope people will take it that way," McMorrow said.
The ACA has required employers to issue formal notification to employees of the availability of health insurance through health exchanges, and it appears the notification compliance date of Oct. 1 will remain. The Treasury Department released a statement last Tuesday that said employees' access to tax credits for buying insurance through exchanges, and all other provisions of the ACA, are not impacted by the administration's decision to delay the penalties and reporting requirements.
Issuing the proper notification to employees is relatively easy, according to Audrey Gasteier, deputy director of policy and research at the Massachusetts Health Connector. Gasteier said the federal government has designed notification templates companies can use so they don't have to draw up their own paperwork from scratch, and all of the required information is spelled out in the federal guidance issued on the ACA.
For its part, the Massachusetts Health Connector is developing educational materials to help employers comply, with special emphasis on smaller employers that don't have the in-house legal and human resources expertise to navigate the ACA.
Gasteier said the Connector will publish booklets and other guidance materials in the coming months and has scheduled informational events around the state in September.
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