July 3, 2013
Last evening on a White House blog the Obama Administration announced a one-year delay in the implementation of certain penalty and reporting requirements under the Employer Mandate section of the ACA. Let’s review what the Administration’s action does and does not do.
The employer mandate part of the ACA was enacted under §1315 [d], which further enacted 26 USC §4980 [H] of the Internal Revenue Code. The IRS is the enforcement agency for the mandate under the ACA.
The mandate would require most businesses with 50 or more full-time employees to provide health insurance meeting certain minimum criteria — or pay a penalty of $2,000 per worker. The purpose of the employer mandate is to discourage employers from dropping coverage and leaving employees to buy subsidized insurance in the Obamacare exchanges at greater taxpayer expense. The delay does not affect the individual mandate, the requirement that most Americans purchase insurance, nor does it halt the implementation of marketplaces where individuals and businesses can sign up for insurance coverage. In the absence of an employer mandate next year, the Treasury Department says it will “strongly encourage employers to maintain or expand health coverage.” Treasury noted that most employers already provide their workers with health insurance.
Here’s the official statement from Assistant Secretary of the Treasury for Tax Policy Mark Mazur:
“Over the past several months, the Administration has been engaging in a dialogue with businesses – many of which already provide health coverage for their workers – about the new employer and insurer reporting requirements under the Affordable Care Act (ACA). We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively. We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so. We have listened to your feedback. And we are taking action.
The Administration is announcing that it will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin. This is designed to meet two goals. First, it will allow us to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees. Within the next week, we will publish formal guidance describing this transition. Just like the Administration’s effort to turn the initial 21-page application for health insurance into a three-page application, we are working hard to adapt and to be flexible about reporting requirements as we implement the law.
Here is some additional detail. The ACA includes information reporting (under section 6055) by insurers, self-insuring employers, and other parties that provide health coverage. It also requires information reporting (under section 6056) by certain employers with respect to the health coverage offered to their full-time employees. We expect to publish proposed rules implementing these provisions this summer, after a dialogue with stakeholders – including those responsible employers that already provide their full-time work force with coverage far exceeding the minimum employer shared responsibility requirements – in an effort to minimize the reporting, consistent with effective implementation of the law.
Once these rules have been issued, the Administration will work with employers, insurers, and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015. Real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.
We recognize that this transition relief will make it impractical to determine which employers owe shared responsibility payments (under section 4980H) for 2014. Accordingly, we are extending this transition relief to the employer shared responsibility payments. These payments will not apply for 2014. Any employer shared responsibility payments will not apply until 2015.
During this 2014 transition period, we strongly encourage employers to maintain or expand health coverage. Also, our actions today do not affect employees’ access to the premium tax credits available under the ACA (nor any other provision of the ACA).”
The CBO estimate of the cost of the extension? $10 billion in lost revenue to the federal government. Where did they anticipate this $10 billion coming from? Employers who failed to comply with the law. With the IRS now invoking the White House’ desire to extent compliance out 12 months this is what the IRS will not collect in penalties.
gbac’s view of the Administration’s action last evening is that it in no way delays the need for our clients to become fully aware of the impact of the ACA on their businesses and begin the process of planning how their businesses’ employee health insurance programs will be managed as a result of the ACA.
Given that the delay is narrow and that the rest of the 2,400 page ACA and its 20,000 pages of regulations remain intact, our work with clients on establishing private health insurance and employee benefit marketplaces that empower employers to manage their benefit programs is more important than ever.
In a rapidly changing and confusing health insurance marketplace, gbac remains on top of events to provide certainty and stability to our clients.