Delay In Health Reform Penalties For Employers Leaves Many Issues Still To Resolve: Mercer

On July 2, the Obama Administration announced that the employer shared responsibility penalties will not apply until 2015. Consultant Mercer noted that while this announcement was a welcome relief for employers, addressing the fundamental challenges raised by the Patient Protection and Affordable Care Act (ACA) remains a priority.

Mercer noted that in the short term, new fees, plan design changes, and the expectation of additional enrollment will add an estimated 2 percent–3 percent or more to health plan cost in 2014, even if employers table plans to extend coverage to all employees working 30 or more hours per week. Longer-term, avoiding the excise tax on high-cost plans slated for 2018 remains a challenge. More than a third of employers recently surveyed by Mercer said that they were taking steps in 2014 to help bring down cost by 2018.

“The delay will give employers more time to cope with some of the requirements, but they know it’s no free pass,” said Julio A. Portalatin, president and chief executive officer at Mercer. “We expect employers to stay 100 percent focused on cost management. Last year, they slowed benefit cost growth to its lowest level in 15 years, but in 2014 they have the new fees and the likelihood of new enrollment to contend with, on top of normal medical inflation.”

Mercer expects employers will continue to prepare for compliance. Mercer’s survey found that about a fourth of employers had not yet decided how they would track and report variable employee work hours and a third had not decided what look-back period to use. The delay gives them more time to address these administrative challenges, Mercer noted. The Treasury department has suggested that proposed reporting and disclosure regulations will be provided this summer. However, public exchanges, which are slated to be operational in 2014, may still reach out to employers to verify applicant eligibility for health insurance.

Half of employers surveyed were concerned about handling employee questions about the exchanges, and 43 percent were concerned about establishing processes and systems for interacting with exchanges. Employers must still prepare to address employee confusion about their need to have health coverage and their options for coverage—both from their employer and the public exchanges.

Extending coverage. According to Mercer’s survey, about a third of employers currently do not extend coverage to all employees working 30 or more hours per week, and many of these employers had already made plans to do so in 2014. “While we don’t know for sure whether these employers will choose to expand eligibility early, they have sufficient lead time to decide to hold off,” said Tracy Watts, a senior partner in Mercer’s Washington, DC, office. “Most have not announced changes yet, and if they have an extensive part-time work force, the money to be saved by not expanding coverage in 2014 could be considerable.”

The delay creates a “gap year” for employees that had been enrolled in mini-med plans. These limited coverage plans may not be offered after the end of 2013 plan years, Mercer noted.

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