Focus on ACA Employer Mandate in 2015, Expert Advises Employers

Employers have been grappling with implementation of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) for several years now. In 2015, the implementation challenges will continue, especially for employers with 100 or more full-time equivalent employees (FTE) who must comply with the employer mandate. In addition, it’s likely that the new Congress will attempt to tweak some of the ACA’s provisions, while the Supreme Court wrestles with the law’s statutory language. New legislation and court rulings could affect employers’ obligations or planning. To shed light on these and other ACA-related issues and how to prepare for them, Wolters Kluwer interviewed Michael M. Maddigan, partner in the Los Angeles office of Hogan Lovells.

WK: What ACA provisions will employers need to focus on in 2015?

Maddigan: I think several aspects of the ACA will continue to draw a substantial amount of focus in 2015.

First, employers will need to focus on aspects of the ACA that are taking effect for the first time. For employers with 100 or more FTEs, the employer mandate takes effect in 2015 and employers will need to focus on their coverage offerings and employee response. For employers with 50-99 FTEs, the focus in 2015 will be on preparing for the implementation of the employer mandate in 2016. Similarly, the employer reporting requirements take effect for all employers with 50 or more FTEs in 2015 and the first employer reports are expected to be due in January 2016. Employers will want to focus on making sure they understand the requirements for those reports and will be in a position to satisfy them.

Second, employers will need to focus on the marketplace changes taking place as the post-ACA market continues to develop and settle. For example, new products continue to emerge (such as narrow network products, for example) and employers will want to focus on the details of those products for their own planning and ACA-compliance purposes. Similarly, for those employers with the option of purchasing coverage from a SHOP exchange, additional coverage options will be available as those exchanges take shape and develop.

Third, employers will need to keep an eye on developments in Washington in order to be prepared if Congress makes material changes to the ACA that affect the employer’s obligations or planning.

WK: What ACA guidance do you expect to be issued in 2015?

Maddigan: One very practical piece of guidance that should be issued in 2015 is a final version of IRS Form 1094-C and 1095-C, which are to be used in connection with the large group employer reporting requirement. There also may be additional guidance in connection with the employer mandate for those employers to whom it now is first scheduled to apply in 2016.

WK: How will the new Congress affect health care reform?

Maddigan: While many in the new Senate majority talk about “repealing ObamaCare,” it is much more likely that we will see bills advanced in the new Congress that seek to tweak or supplement the ACA. This type of effort could take place in a number of ways. First, we may see bills that seek to amend the ACA to address new issues. An example of this first type of bill is the Hire More Heroes Act, which seeks to exempt post 9/11 veterans from the count of employees used for purposes of triggering the employer mandate. The bill passed the House last year and appears to have bipartisan support.

Second, we may see bills that explicitly seek to revise portions of the ACA while still accepting its basic structure. One ACA element that might be addressed through this second type of bill is the use of a 30 hour work week for purposes of calculating the number of “full time” employees. Senator Mitch McConnell and others have talked about introducing legislation to define a “full time” employee by reference to a forty-hour work week instead.

Third, we may see bills that are aimed at outright repeal of portions of the ACA other than those provisions – like the individual and employer mandates, for example – that previously have been the focus of discussions about repeal. An example of this type of bill might be legislation aimed at eliminating the medical device “tax” or another similar, specific provision.

WK: What do you expect the Supreme Court to do regarding the pending ACA-related cases?

Maddigan: There obviously has been a great deal of speculation about this question. Some supporters of the ACA have speculated that the same considerations that previously made the Court reluctant to overturn the ACA likewise will prevent it from reaching a result that may effectively accomplish indirectly what the Court was unwilling to do directly. On the other hand, some opponents of the ACA have speculated that the deference the Court previously showed to the political branches’ enactment of a major piece of economic and social legislation does not apply to the agency rulemaking and interpretations and that that difference likely will lead to a different result. The reality, of course, is that no one knows what the Court is going to do. The case is a difficult one because, while agencies regularly “correct” drafting errors or inconsistencies and address ambiguities in legislation through the rulemaking process, the “correction” here is one that is in real tension with one literal reading of the text. If I were going to guess about the outcome, I would guess that, in the end, for the reasons stated in the Fourth Circuit’s opinion upholding the use of tax credits on the federal exchanges (as well as in the dissent from the DC Circuit opinion finding the use of such credits to be invalid) the Court will find the ACA’s statutory language to be ambiguous and defer to the IRS’s discretion in permitting such tax credits. But, as I say, no one knows what the Court will do, and I certainly don’t pretend to.

WK: How should employers who will be subject to the employer mandate in 2016 prepare for it this year?

Maddigan: Employers who will be subject to the employer mandate in 2016 should begin preparing for it now. This really is an instance where preparation will become more and more difficult the longer an employer waits to start preparing. It makes sense for employers to develop a plan and a process to ensure that they are ready. Three of the elements that should be included in any such process are: (1) projecting work force needs, in order to assess both the cost of providing appropriate insurance and the potential penalties for not doing so; (2) developing plan design so that it can meet the ACA’s coverage standards and affordability criteria, while holding down the employer’s cost to the extent possible; and (3) designing and implementing any wellness program the employer intends to offer and any accompanying communication plans, particularly to the extent the employer intends to rely on such a wellness program to reduce cost.

WK: Is there anything else that you’d like to add?

Maddigan: I think there is one interesting aspect of the ACA tax credit cases currently pending before the Supreme Court that has not received significant press or public commentary. One of the arguments opponents make against the availability of tax credits on the federal exchange is that the ACA clearly sets up an either/or choice when it comes to exchanges: a state can either choose to run its own exchange or defer to the federal exchange. The reality, however, is more complex, as a number of states have chosen, with HHS’s permission, “hybrid” or “partner” exchange models where the state elects to defer to the HealthCare.gov federal marketplace but retains control over some aspects of plan selection, rating, monitoring, oversight, or consumer assistance functions. Thus, the “real world” of the exchanges is more complex than the simplest version of the “either a state exchange or a federal exchange” argument advanced by those who contend that the use of tax credits on the federal exchange is impermissible.

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