July 3, 2013
The Obama administration announced yesterday that the employer “play-or-pay” mandate portion of the Affordable Care Act (ACA) will not be enforced until 2015. Under the employer shared responsibility provisions of the ACA, large employers (50 or more full-time equivalents) are obligated to offer affordable minimum health insurance coverage to employees who work 30 or more hours per week or pay a substantial penalty. Previously, this mandate was to go into effect on January 1, 2014. Employers now have until January 1, 2015 to comply with the mandate.
The employer “play” element of the mandate requires large employers to offer affordable minimum coverage which means that (1) the premium for individual (employee-only) coverage is no greater than 9.5% of the employee’s total household income and (2) the health plan pays for at least 60% of the costs of the benefits provided under the plan.
The “pay” element of the mandate generally means that a large employer that does not offer coverage and has at least one employee purchasing coverage with a premium tax credit through a federal or state health insurance marketplace, must pay an annual penalty of $2,000 per full-time employee, less the first 30 employees. If a large employer offers some coverage, then the penalty is the lesser of $3,000 per employee who receives a premium tax credit or $2,000 per full-time employee, less the first 30 employees.
The U.S. Treasury Department explained the decision to delay implementation of the employer “play-or-pay” mandate, citing to employers’ concerns about the complexity of the employer shared responsibility and reporting requirements and the need for more time to implement them effectively.
The individual mandate to obtain health insurance coverage by January 1, 2014, has not been delayed. Individuals who do not obtain health insurance through their employers or a spouse’s employer, either because coverage is not offered or they choose not to purchase through their employer, will be able to purchase coverage through the exchange, or marketplace. Open enrollment through the marketplace begins October 1, 2013.
The Treasury Department is expected to release more information after the 4th of July holiday regarding the impact of the delay. One question that needs to be answered is whether employers must comply with the October 1, 2013 notice requirement. Currently, employers are required to give all employees a notice with certain information regarding the health insurance coverage that will be offered by the employer as of January 1, 2014, as well as information regarding the employees’ option to purchase coverage through the marketplace and the potential to receive premium tax credits. We anticipate that the notice requirement will remain in effect because the information remains important to help employees who are eligible to enroll in an employer’s plan make an informed decision about the source from which they will purchase health insurance.