United States: Health Care Reform Provisions For 2014 And Beyond

Executive Summary: Earlier this year, the Obama Administration delayed implementation of the employer mandate, a major provision of the 2010 health care reform law (the Affordable Care Act or "ACA"). The delay of the employer mandate, however, did not impact other provisions of the ACA, many of which are going forward as scheduled. Additionally the reprieve may be short-lived because, unless additional guidance is issued, January 1, 2014, will start the clock on determining an employer's size for purposes of the employer mandate, and for determining which employees will be considered full- and part-time for purposes of offering health care coverage.

Provisions Delayed

The Employer Mandate: Generally, the employer mandate requires employers with 50 or more full-time employees to offer health insurance coverage to their full-time employees or face a penalty. Employers must offer "minimum essential health coverage," which provides minimum value and is affordable to substantially all (at least 95%) of the employer's full-time employees. The employer will be assessed a penalty if one or more full-time employees obtains coverage from a state- or federally-run health insurance exchange and is eligible for a subsidy or cost-sharing reduction. Under the ACA, a "full-time" employee is an employee who works 30 hours or more per week or 130 hours or more per month.

Because of the July 2013 delay, employers who fail to offer minimum essential coverage that provides minimum value and is affordable to their full-time employees under the ACA's employer mandate will not be subject to a penalty in 2014.

SHOP Exchanges: For small employers (generally, those with fewer than 50 employees), full implementation of the Small Business Health Insurance Exchanges (SHOP), a featured provision of the state- or federally-run health exchanges, has also been delayed until 2015. Small businesses should be able to participate in a limited operation of SHOP in 2014, but generally will not have access to a variety of health insurance options until 2015. Small employers who employ fewer than 25 employees may still qualify for a tax credit for providing health care in 2014.

The Affordable Care Act in 2014

Despite the delay, many provisions of the ACA are moving forward as scheduled, such as: adopting certain plan design requirements regarding the type of coverage that must be provided (such as women's preventive care and the elimination of pre-existing condition exclusions); implementing a 90-day waiting period; reporting the cost of employer-provided health care coverage on employees' tax forms; and distributing certain notices.

Additionally, starting January 1, 2014, individuals must still obtain coverage under the ACA's individual mandate or pay a penalty. The federal government recently released new regulations clarifying certain aspects of the individual's responsibilities under this mandate. Individuals have until March 31, 2014 to sign up for coverage on the health insurance exchanges to avoid paying a penalty. For 2014, the penalty will be the greater of $95 or 1% of the employee's household income for the year. The employee may also pay a penalty for his spouse and any tax dependents who do not have health insurance coverage.

Moreover, the July 2013 delay did not affect many of the fees imposed by the ACA or the requirement that employers distribute Medical Loss Ratio rebates, if any, to participants shortly after they are received from insurance companies. For more information, please see FordHarrison's Legal Alert, Guidance Released on Delay of "Pay or Play" Penalties Under ACA.

Finally, we expect additional regulations on the employer mandate, nondiscrimination requirements, auto-enrollment, and the Cadillac tax (for generous health plan benefits), among others, which may create additional obligations under the ACA.

Employer Reactions Mixed

Employer reactions have been mixed. Some employers who are already offering health care benefits to employees that meet the standards set forth by the ACA are warming to the new health care reform requirements. Other employers are still drastically changing their approach to health care to cut costs.

For example, some employers plan to trim spousal benefits. Under the employer mandate, large employers generally must offer substantially all of their full-time employees minimum essential health care coverage that provides minimum value and is affordable, as defined by the ACA, or pay a penalty if a full-time employee goes to a health insurance exchange and qualifies for a subsidy. Notably, this coverage must be offered to employees and their dependents, but not spouses.

Other employers are planning to utilize private exchanges. There are several private insurance companies that are planning to offer private exchanges to employers as a lower cost option to employer-sponsored health care coverage. Whether the governmental agencies will release additional guidance on the use of the private exchanges is not yet clear.

Some employers are planning not only to cut their costs, but costs to employees as well, and some employers are exploring a dual-plan approach. Under the ACA, to provide affordable coverage, the employer's plan must provide minimum value and be affordable to the employee. Affordable means that the cost of employee-only coverage is no more than 9.5% of the employee's household income. Even at 9.5%, some employees find premiums for these plans unaffordable. To provide a lower cost option to employees, some employers are exploring whether they can offer a health care plan that meets the requirements of the ACA, as well as a stripped down plan that does not meet all of the ACA requirements, but generally is cheaper to the employee.

Other employers are planning to trim employees to get under the 50-employee large employer threshold, or create new part-time positions to replace full-time positions to reduce the number of employees to whom health care will be provided. However, employers face a number of risks and potential employee challenges in doing so. Careful planning and communication is required.

2015 Planning Opportunities Start January 1, 2014 or Sooner

Despite the delay of the employer mandate, there are at least two planning opportunities for the employer mandate that start much sooner than 2015.

Determining Employer Size: The ACA provides that an employer's status as a large or small employer under the employer mandate is determined by looking to the employer's average size during the full 12 months of the preceding calendar year. Before the delay, the IRS had created a transition rule that permitted employers to look to any consecutive six-month period in 2013 to determine whether they were a large or small employer for 2014. The current employer mandate delay did not delay the transition rule. Accordingly, employers may now have to look to the full 12 months of 2014 to determine whether they are large or small employers.

Measurement Periods for Variable Hour and Seasonal Employees: In addition, IRS guidance allows employers to use measurement periods to measure variable hour and seasonal employees. Generally, if an employer cannot reasonably determine whether an employee will be a full- or part-time employee, or if the employee is a seasonal employee, the employer may use a measurement period of between 3 and 12 months to determine the employee's status. Once the measurement period has run, if the employee is, on average, determined to be full-time, the employer generally must offer that employee health care coverage for a period of time that is not less than the measurement period or at least six months (called the "stability period.") If the employee is, on average, considered to be part-time, the employer is not required to offer the employee health care coverage for a stability period (that is no longer than the preceding measurement period). The IRS rules allow for a gap period (called the "administrative period") of no more than 90 days between the measurement period and the stability period during which time the employer can determine the employee's full- or part-time status, and offer the employee coverage.

Under a 2013 IRS transition rule, employers were able to use a 6-month measurement period in 2013 and still use a full 12-month stability period in 2014. Now, unless other guidance is released, employers that want to use a 12-month stability period in 2015 may need to start measuring variable hour employees as soon as October 1, 2013 if employers also plan to use the full administrative period.

Conclusions

Employers cannot afford to wait until next year to start planning compliance with the ACA. Although the penalties under the employer mandate have been delayed until 2015, employers will still face compliance hurdles in 2014 in implementing the other provisions of the ACA. In addition, because many of the transition rules have not yet been delayed, planning for 2015 starts much sooner than many employers expect.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.