President Obama announced in early July 2013 that the Employer Mandate imposed by the Patient Protection and Affordable Healthcare Act (“the Act) which was scheduled to become effective January 1, 2014 will be postponed until January 1, 2015. The postponement was attributed to the need for employers to develop and implement the recordkeeping and reporting procedures required by the Act.
Employers had complained that they needed more time, in part, because, the federal government still had not issued sufficient regulations to provide guidance as to how employers could comply with the those procedures. As a consequence, the government decided to postpone the Employer Mandate to allow more time to confer with employers and fine tune and simplify the regulations. The media and opponents of the Act have made much of the postponement, but its actual significance may be much less than portrayed.
The Act requires employers who employ at least 50 full-time employees to: (1) provide a “minimum essential” level of employer-sponsored medical insurance for full-time employees and their dependents; or (2) pay the IRS a $2,000 penalty per year starting in January 2014 for each full-time employee who is not provided such coverage. That penalty is designed to prevent employers, who do not provide the requite level of medical insurance for employees, from being “free riders” by shifting that financial burden to the government, insurance companies, and healthcare providers. The penalty, which will increase in subsequent years, will help finance employees’ participation in Health Insurance Exchanges created by the state and federal governments.
The Act also requires such employers and only those employers to keep records and submit reports regarding: (1) the level and quality of medical insurance which they are providing to employees; (2) the number and names of full-time employees who are receiving coverage; (3) the employees receiving subsidies from the federal government to purchase insurance if their employers fail to provide sufficient coverage. Thus, the Act imposes no penalties or reporting or recordkeeping obligations on the 95% of employers with fewer than 50 full-time employees.
In addition, the government has NOT postponed the October 1, 2013 deadline for all, except some, Americans to procure minimum essential level insurance through their employers or a Health Insurance Exchange. As a consequence, the government has not delayed a, if not “the”, major goal of the Act, namely increasing the number of individuals with coverage.
Moreover, employers who do not provide adequate coverage may be pressured to do so by employees who must purchase insurance at their own expense. Those employers may also encounter difficulty recruiting and retaining quality employees if competitors offer quality medical insurance. That fact probably explains why 95% of large employers subject to the Act provide medical insurance.
During the ensuing months, employers will witness ongoing political jousting regarding the Act and efforts to repeal that legislation, but total repeal or the elimination of the Employer Mandate is unlikely. As a consequence, employers should prepare to implement the reporting and recordkeeping obligations imposed by the Act, without being distracted by events in the political arena.