The delay of several key elements of the Affordable Care Act (ACA) is welcome news to many employers. The employer informational reporting and employer mandate have been delayed until 2015.
Despite the delays of certain provisions there are still steps you need to take this year to become compliant with other provisions of the ACA that have not been delayed. Here are some provisions that are still in place:
The individual insurance mandate. It appears that next year individuals will still need to comply with the individual mandate to have health care coverage. It is unknown yet if a new reporting from employers will be used in this area for the 2014 tax year.
The individual insurance marketplaces/ exchanges. This exchange is still being targeted for a fourth quarter 2013 launch, and is an opportunity for significant savings for some employers.
The Oct. 1, 2013, communication on exchanges from the Department of Health and Human Services. Companies’ large and small still need to provide their employees with a notification about the availability of the exchange and some details about the business and their insurance offerings. This is due by Oct. 1, 2013, and then will be part of new hire documents thereafter.
New fees on providers of insurance. The first round of new fees that insurance providers owe is due at the end of July (for self-insured plans). This excise tax ultimately will be paid by businesses. If a business is self-insured, they will need to pay the federal government directly and complete a filing. The first fee can be due at the end of July, so be prepared! There are new per life fees of around $65 (so a family of four you insure will cost you nearly $260 more annually). This straight cost increase is not impacted by the delay.
The new reinsurance cost that is approximately 2 percent of your total premium. Fee collected from insured group plans and self-funded employer groups. This straight cost increase is not impacted by the delay.
The rate swing between best and worst insured groups is shrinking. An insurance company may charge this range from their best group to their worst group of insured. Because the range is shrinking, and there is price point pressure to meet in the middle, some groups will see rates go up and some will see rates stay the same or drop a little.
No preexisting conditions and other technical changes. A host of technical changes to health insurance in general will go into effect in January 2014 as planned.
This is good news for businesses that were not providing sufficient insurance to employees. These businesses would have to pay penalties or increase the amount they pay for coverage and the employer mandate or "pay or play" provision would have been a pure cost increase. But, the delay in the "pay or play" provision better positions large employers to evaluate an opportunity that small employers were already considering – dropping your health care coverage and allowing your employees to go to the exchange for coverage.
If, instead of paying your current benefit costs and increases, you chose to drop coverage and let your employees go to the exchange— what would that look like? For one, you would save all those benefit costs. If you were a large employer, you would also have paid your "pay or play" penalty (except this is now delayed a year). The only other expense you might have is paying something to your employees to "make them whole." That means that some employees, due to their family size and income, would get significant premium subsidies that in many cases will be better than what the employer is providing now for similar coverage. Family coverage in the private market now is typically above $1,000 per month – on the exchange some families could buy better coverage for under $500 per month. Some employees, though, would be worse off going to the exchange – they would pay more for similar level coverage.
You as the employer can take some of your savings and pay your employees so that no one is worse off going to the exchange. Many will be better off. You may net save 25 to 50 percent of your current employer share premium cost. That's a win for employees and a win for the business! Due to the delay in the employer "pay or play" mandate, large companies now have an even better opportunity to examine and implement this change. What if your employees hate it? You can go back to private insurance next year.