It’s been a big week for employee benefits law, starting with the Supreme Court’s Windsor decision on DOMA last Wednesday, the administration’s release of a final rule on the religious employer exemption to the contraception mandate, and now a surprise temporary reprieve for employers from the play-or-pay penalties that were scheduled to take effect in 2014.
Transition Relief. In a blog post published quietly on Tuesday afternoon, a senior Treasury Department official said that the administration had been listening to concerns raised by employers about the time needed to implement various aspects of the health care reform law and would be publishing formal guidance within the next week delaying enforcement of the employer shared responsibility (or “play-or-pay”) mandates until 2015. However, the post affirmed that qualifying individuals purchasing health insurance coverage through exchanges in 2014 would continue to have access to premium assistance tax credits. And a related post on the White House Blog asserted that exchange implementation is proceeding "full steam ahead" and is "on target."
What Does the Delay Mean? We won’t know all the specifics until the formal guidance is released (and even then there are likely to be questions). But in broad terms, it appears that large employers will not need to be ready to comply with the play-or-pay requirements until at least January 1, 2015. So, for example -
- It may not be necessary to implement the look-back measurement period regime until later this year, or perhaps even 2014.
- Fiscal-year plans facing a tricky transitional period in 2014 will have another year to consider and implement a transition plan.
- Employers will have some opportunity to evaluate the impact of insurance market reforms on premium costs, which will allow for better understanding of the financial stakes associated with providing coverage to employees.
What About the Individual Mandate and Exchanges? Health care reform has many interconnected features. The play-or-pay rules were designed to encourage employers to make affordable coverage available to their full-time employees. Those employees could then use that coverage to satisfy the individual requirement to maintain health insurance coverage or pay a penalty.
So without the employer mandate, does the individual mandate fail? Maybe not. Nothing in today’s news suggests the administration is relaxing its position on the individual mandate - and perhaps for good reason. Individuals will continue to have access to coverage through the exchanges, even if they do not have access through their employers. And the exchanges will continue offering premium subsidies for qualifying individuals (generally individuals with household income below 400% of the federal poverty line), making coverage more affordable for them.
As for the exchanges, although there is continual speculation about whether they will be fully functional by October 1 of this year, the administration’s official position is that they are on-track. And there is continued reason to believe the government will do all it can to make that happen. One key function of the exchanges is to determine eligibility for the premium assistance tax credits and then facilitate the collection and use of those credits to pay premiums for coverage purchased on the exchange. If the government expects the tax-credit program to continue, the exchange program is an essential component of that and will need to be functional as well.
Implementation of Other ACA Provisions Continues. There is nothing in this recent development suggesting a broader delay in implementation of other aspects of health care reform coming online in the next 6-12 months either. The insurance market reforms, such as the new regulations on wellness plans, premium rating, contraception, and the 90-day waiting period, all appear to be moving forward. And some of the financing tools, such as the transitional reinsurance fee, the PCORI fee, and the increased Medicare taxes are also set to proceed as planned. So employer activity in implementing those other requirements will need to continue.
In short, this development is positive news for employers that wanted or needed additional time to prepare for the play-or-pay requirements. But in the absence of further guidance or transitional relief, it should not be viewed as a broader slowing of health care reform implementation.