The Treasury report states that employers and insurers will be exempt from the reporting disclosure requirements on welfare plans and eligibility rules until 2015, effectively postponing the Pay or Play requirements under IRC Section 4980H for 2014. These reporting requirements are the tool employers are to use to demonstrate compliance with the "pay or play" requirements. The Treasury report also indicates that the official guidance will be issued later this week. The Treasury posting provides, in part:
...The Administration is announcing that it will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin. This is designed to meet two goals. First, it will allow us to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees. Within the next week, we will publish formal guidance describing this transition. Just like the Administration’s effort to turn the initial 21-page application for health insurance into a three-page application, we are working hard to adapt and to be flexible about reporting requirements as we implement the law.It also appears that all other Patient Protection and Affordable Care Act (ACA) provisions, including the PCORI fees remain in effect.
Here is some additional detail. The ACA includes information reporting (under section 6055) by insurers, self-insuring employers, and other parties that provide health coverage. It also requires information reporting (under section 6056) by certain employers with respect to the health coverage offered to their full-time employees. We expect to publish proposed rules implementing these provisions this summer, after a dialogue with stakeholders - including those responsible employers that already provide their full-time work force with coverage far exceeding the minimum employer shared responsibility requirements - in an effort to minimize the reporting, consistent with effective implementation of the law....
We will keep you informed as we learn more about the impact of this delay in implementation. Set forth below is sampling of news summaries, legal, political and cost implications resulting from this decision.
NEWS SUMMARIES
...The delayed provision was to take effect this fall. It requires companies with 50 or more workers to provide health benefits to full-time employees or pay fines starting at $2,000 per worker. Businesses were critical of the provision. They argued that it created a disincentive for small businesses to hire new workers, especially if they were bumping up against that 50-person threshold.
The Obama team said it was delaying the provision because reporting requirements were too burdensome. Officials said they needed more time to fix them.
Yet they didn’t delay the tax consumers face for not carrying coverage. The delay on the employer mandate will inevitably expose some additional consumers to the “individual mandate” (ruled a tax by the Supreme Court).
Now fewer businesses will feel compelled to start offering coverage next year. So their employees will face a choice: be forced to go into the Obamacare exchanges or be subject to the new tax.
It’s true that larger firms that would consider dropping coverage would have done it anyway. After all, the fines presumably return in 2015, and firms need to make longer-term decisions about how they will adapt to the new law. But at least for next year, this will expose some additional consumers to the tax.
As to the reason for the change, that’s also rife for skepticism. Especially since it may put more consumers in a financial bind.
The Obama team’s stated purpose seems superficial. It’s doubtful that reporting requirements alone drove this decision. Perhaps the administration was seeing the effects of the insurance requirement on new hiring. Perhaps they’re starting at a bad jobs report later this week.And from Jackie Calmes at the New York Times:
...The change does not affect other central provisions of the law, in particular those establishing health care marketplaces in the states — known as exchanges — where individual Americans without health insurance can shop from a menu of insurance policies. Under those provisions, subsidies are available for lower-income individuals who qualify.
However, it will be difficult for officials running the exchanges to know who is entitled to subsidies if they are not able to confirm whether employers are offering insurance to their employees. Enrollment in the exchanges is to begin on Oct. 1, and they are to take effect on Jan. 1.
Much of the administration’s public effort, especially at the Department of Health and Human Services, has been directed toward spreading the word to uninsured Americans, especially younger and healthier individuals whose participation is needed to help keep down the price of premiums for everyone else. About 15 percent of Americans are uninsured, so most individuals are unaffected, at least initially.
Behind the scenes, however, the administration has been fielding questions and criticism from businesses about the mandated reporting requirements — especially the Treasury Department, which has responsibility, given its oversight of the nation’s tax reporting system.
Mr. Mazur wrote that the one-year delay “will allow us to consider ways to simplify the new reporting requirements consistent with the law." He added, “Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees.”
Within the next week, he added, the Treasury will issue official guidance to insurers, self-insuring employers and other parties that provide health coverage. Formal rules will be proposed later this summer, he added.
In the meantime, Mr. Mazur said, the administration will encourage employers to comply with the law’s reporting provisions in 2014, as originally mandated.
In a separate posting on the White House Web site, President Obama’s senior adviser and liaison to the business community, Valerie Jarrett, emphasized that the health insurance exchanges were on schedule — though that is in dispute, especially in states with Republican-led governments that are resisting the health care law. ...
The revised timetable, the [Treasury] source added, will also push back the final implementation of Obamacare's penalties past the 2014 midterm elections, providing Republicans fewer chances to highlight the law's potentially harmful effects on businesses' bottom lines.
This is from Jennifer Rubin at the Washington Post, Seven Reason's Obama's Employer Mandate Delay is a Huge Deal:
In deciding to postpone the implementation of the employer mandate, the Obama administration has undermined its sole claim to greatness and delivered a blow to Democrats on the ballot in 2014. Here are seven reasons (more will pop up in the days to come) why it is a huge setback:
1. It proves the president’s assurances that everything was 100 percent on track to be false. His credibility is low now; this may send it skidding further.
2. This gives every Republican the “I told you it was a mess” argument in 2014.
3. It also gives Republicans encouragement that they can prevent the mandate from ever going forward and can see Obamacare collapse under its own weight.
4. The delays are another instance in which Obama’s support for big government will undermine Americans’ faith in it. It is all too unwieldy to run well.
5. It will open the floodgates to arguments that the rest of the law should be delayed as well. (See #2.)
6. It will fuel the meme that Obama’s second term is a flat-out disaster.
7. And if Obamacare is in tatters, what has Obama accomplished in his presidency?
UPDATE: This inequity is great here. A big employer could potentially drop insurance, sending the employee out to pay more for his coverage or face a fine. The law for the little guy will become his worst nightmare. Pressure may therefore build to delay the individual mandate so as to alleviate this problem. Meanwhile Senate Minority Leader Mitch McConnell (Ky.) is quick off the draw with a statement: “Obamacare costs too much and it isn’t working the way the administration promised. And while the White House seems to slowly be admitting what Americans already know, and what I hear consistently in my travels around Kentucky regarding the regulatory burden on employers, the fact remains that Obamacare needs to be repealed and replaced with common-sense reforms that actually lower costs for Americans.” You can almost visualize his Cheshire cat grin. House Majority Leader Eric Cantor (Virg.) adds: “Rather than continuing to delay the predictable pain until another election day has passed, we should scrap this entire law and instead implement patient-centered reforms before any more damage is done to our economy or the health care families depend on. The best delay for ObamaCare is a permanent one.”
COST IMPLICATIONS
Tuesday's announcement will mean a drop in revenue for the Treasury and yet another increase in the law's price tag. The CBO estimated about $10 billion in employer penalties would be collected in 2015, some of that clearly from employers who chose not to offer coverage in 2014.
Aaron Carroll at the Incidental Economist:
The employer penalty was a solution to try and reduce the cost to the government by shifting more of the cost of insurance onto employers. It has good parts and bad parts. Personally, I agree with Ezra that it could have been done better. I also think the individual mandate could have been done better. But I’d rather see the government work to fix these ideas rather than haphazardly hold them up or suspend them. They were there for a reason. Those reasons haven’t changed.
In the short term, the delay will have several effects. First, the mandate drives up the cost of labor, and therefore increases unemployment; delaying the mandate by one year may modestly mitigate that disincentive.Most importantly, the delay of the mandate means that more people will want to enroll in Obamacare’s subsidized insurance exchanges. Every year, fewer and fewer employers offer health coverage; given one more year to restructure their workforces, this process could accelerate.
LEGAL IMPLICATIONS:
A brief email from one of our ERISA partners, Alston and Bird, reminds us that, "while this is cause for some excitement, the only provisions of the ACA that have been delayed are as follows":Does Obama have the legal authority to delay the mandate?The Affordable Care Act is quite clear as to the effective date of the employer mandate. “The amendments made by this section shall apply to months beginning after December 31, 2013,” concludes Section 1513.The executive branch is charged with enforcing the law, and it can of course choose not to enforce the law if it wants. But people can sue the federal government, and a judge could theoretically force the administration to enforce the mandate.So the question is: Would anyone sue the Obama administration over this? Employers, of course, will be thrilled to be spared the mandate for one more year. Democratic politicians, similarly, will be glad to have this not hanging over their heads for the 2014 mid-term election.The wild-card is left-wing activists. Most, you’d think, would defer to the administration on questions of implementation. I’m no lawyer, but it seems to me that all it would take is for one judge to issue an injunction, for an activist to require the administration to enforce the mandate.
- 6055/Individual Mandate reporting (that would have taken place in 2015 for 2014)
- 6056/Pay or Play reporting (that would have taken place in 2015 for 2014)
University of Michigan Assistant Law Professor, Nicholas Bagley, in a guest post at the Incidental Economist writes that even though the decision to forgone congressionally mandated enforcement for a year might be unconstitutional, nobody will have solid enough standing to challenge the move:No other provisions of the ACA are impacted by yesterday’s announcement. Consequently, the following ACA provisions (among others) continue to apply:
- 4980H pay or play rules
- Individual mandate. Presumably, the IRS will monitor compliance with the individual mandate through self-certification on each individual’s tax return
- The marketplace notice. Unless the administration delays the exchanges (which I believe is unlikely), employers are required to send the marketplace notice. Also, the affordability/minimum value box on the notice is still relevant. Affordability/minimum value are not concepts limited to the 4980H pay or play rules—they are concepts relevant to ANY employee (part-time, full-time, temp, etc) of ANY employer (regardless of size) who is eligible for employer sponsored coverage and who wishes to apply for a subsidy in the exchange. I repeat—those concepts are not delayed solely because the 4980H rules are delayed.
- The Health Insurance Reforms that go into effect as of the first day of the plan year that begins in 2014 (e.g. the 90 day waiting period).
- PCORI Fee (which is due at the end of this month if you have a calendar plan year or a plan year that ended in October or November of 2012)
- Transitional Reinsurance Fee.
- W-2 reporting
- The limit on Health FSA salary reductions
...A would-be litigant must have standing to go to court, which means that the supposedly unlawful agency action must have injured, or be expected to injure, the litigant. Employers can’t meet that standard: waiving a tax penalty doesn’t harm them (and no, fancy theories that an employer is harmed because his competitor isn’t taxed enough won’t get off the ground). Nor would upset advocacy organizations or members of Congress have standing.
So who’s hurt? It’s possible, even likely, that some workers will lose out on employer-sponsored insurance as a result of the waiver. But any individual worker is going to be hard-pressed to convince a court that her employer would have given her health insurance in 2014 but for waiver of the tax penalty. Under current doctrine, that’s much too speculative a potential injury to support standing. Unless I’m missing something, no one has standing to challenge the waiver—whether it’s legal or not.
..."The policy implications are fairly straightforward. Essentially for calendar 2014 the act of dropping coverage and dumping employees into the exchanges is on sale," said Douglas Holtz-Eakin, former director of the Congressional Budget Office and now president of the American Action Forum. "Drop and dump, but no penalty."...
"If employers have no obligation to report coverage, how will the exchanges or the IRS verify claims that coverage is unaffordable or inadequate?" said Timothy Jost, a law professor at Washington and Lee School of Law. "Could this potentially mean that many more individuals will become eligible for premium tax credits, either because their employers drop or do not expand coverage, or fail to respond to requests to verify coverage?"...
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