Health Care Reform: What Do Employers Need to Do Now?

Employers struggling with how to meet the Affordable Care Act (ACA) regulations received some relief in July 2013 when the U.S. Treasury announced a one-year delay on implementation of the “pay or play” mandate. This mandate would have required most employers with the at least 50 full-time equivalent employees to provide affordable, minimum value health insurance coverage to their full-time employees by January 1, 2014, or pay a penalty.

However, the delay on implementation of the “pay or play” mandate did not delay the individual mandate, which will require most individuals to purchase health insurance coverage in 2014, or pay a tax penalty. The Treasury has also indicated that the delay in the employer mandate will not affect an employee’s access to the premium tax credits available to individuals who purchase coverage through the Exchange beginning January 1, 2014.

There are many other ACA provisions that will require compliance by January 1, 2014, including:

• Minimum value compliance for employer-sponsored group health plans still needs to be determined for the 2014 plan year. This information is reported both in written notices about the new health insurance exchanges, (which most employers should have distributed by October 1, 2013), and in summaries of benefits and coverage (aka SBCs)
• New fees and assessments, such as the PCORI and transitional reinsurance fees and health insurer tax.
• Summaries of benefits and coverage (SBCs) must be updated, prepared and distributed for 2014 during open enrollment to everyone eligible for benefits, as well as new hires and anyone experiencing a qualifying event during the plan year
• Elimination of annual dollar limits on essential health benefits under group health plans, beginning January 1, 2014.
• No more pre-existing condition exclusions for adults as well as children for plan years beginning in 2014.
• Grandfathered health plans can no longer exclude adult children under age 26 who have access to other employment-based coverage, effective January 1, 2014.
• Benefit coverage waiting periods can’t be longer than 90 days effective for plan years beginning in 2014.
• Coverage of clinical trials is required for non-grandfathered group health plans, along with prohibition on discrimination based on participation in a clinical trial.
• New wellness incentive rules for plan years beginning in 2014.
• Maximum out-of-pocket limitation will prohibit, for both insured and self-insured non-grandfathered plans, out-of-pocket limits that that exceed $6,350 (self) and $12,700 (family) coverage, for plan years beginning in 2014.

So, What Should Employers Be Doing Now?

Employers should first make sure their plans comply, or will comply in 2014, with all ACA provisions that have not been delayed. Next, employers should plan for eventual application of the pay or play mandate to their workforce. This should include:

• For a smaller employer, confirming whether or not it will meet the threshold to be subject to the “pay or play” mandate in 2015, particularly if the organization could be considered under common control with other entities that share some common ownership.
• Confirming how the employer will comply with the mandate—whether it will pay or play and how to implement its compliance strategy in 2015.
• If 2014 coverage expansions were planned to achieve compliance, deciding whether to proceed, delay until 2015 or consider another compliance strategy.
• Identifying which employees are full-time, seasonal or variable hour employees.
• Considering whether and how to utilize the safe harbor “look-back measurement method” of determining full-time status of some or all ongoing employees or new variable hour and seasonal employees (which would include selecting appropriate measurement, administrative and stability periods).

The one-year delay also gives employers more time to see whether changes in the law may relieve them from expanding coverage to workers who average more than 30 hours per week or perform only seasonal labor. As of mid -September, at least four bills had been introduced to change the full-time employee standard to 40 hours. At this point, the chances of passage are unclear, so this will be an important issue to watch.

While the delay in the pay or play mandate gives employers additional time, the clock is ticking for many other ACA compliance efforts, and employers should be prepared and seek guidance now.