Federal Healthcare Employer Mandate Delayed: Now What?

Insurers will take advantage of the delay, too, which will have beneficial impacts for employers. Vasconcellos predicts that more insurers will join Small Business Health Option Program (SHOP; www.healthcare.gov/marketplace/shop) exchanges, which are a linchpin of providing affordable healthcare for small businesses. “SHOP exchanges ' were not going to be up-and-running in 2014,” she says. “In many states, there might have been one. With another year, these can be fully implemented.”

Complexity Remains a Challenge

Despite the delay, attorneys say that business owners have numerous challenges in understanding the complicated ' and unfinished ' regulations. “Many franchisees were scrambling to understand if they had to offer health insurance to their workers,” says C. Logan Hinkle, a partner with Burr & Forman, LLP, in Birmingham, AL. “Fast-food franchises, for example, have unique circumstances of many part-time workers and high turnover. So they have to understand the rules about full-time equivalent [FTE] employees, full-time workers and measurement periods for workers with variable schedules.”

Some of Hinkle's clients have been looking carefully at their work forces to identify key personnel to keep on full-time status, and which workers can be shifted to part-time so that they do not have to be offered health insurance, he says. “That has to be balanced against what you need to do to attract and retain good workers,” he adds.

Of course, it's tough for employers to make those types of decisions when they do not know what the final rules will be. Some of the crucial definitions under the ACA that will affect small businesses most directly have not yet been finalized. These rules will define an FTE, affirm whether 50 FTEs will be the threshold for the employer mandate, and set the time after which an employee must be offered coverage, among many other provisions. The proposed rules were published in January 2013 and were expected to be finalized already, says Vasconcellos. On the one hand, employers have a right to be angry about the delay, she says, but she suggests that there's a silver lining: “I think that the delay suggests that the burden might be lessened on employers when those final definitions are released.”

Changing those standards would be a relief to franchisees, says Sean Falk, owner of 12 franchises (including, Salsarita's Fresh Cantina, Great American Cookies, Mrs. Fields Cookies, and Pretzelmaker). Speaking at a hearing held by the House Committee on Ways and Means Subcommittee on Health on July 10, Falk asked for an increase in the 30-hour threshold that qualifies an employee as full-time to 40 hours a week and an increase in the 50 FTE-employee threshold. Falk, who currently has 43 FTEs, observed: “If my business grows and I create more jobs, I will also drastically increase my costs due to the employer mandate. This has unavoidable repercussions on my bottom line and is forcing me to reconsider opening new locations.” (A list of speakers at the July 10 hearing with links to their testimony is available on the Committee on Ways and Means website at http://1.usa.gov/13QLUX4.)

Impact of Mandate in 2014

Some parts of the employer mandate have not been delayed, and Hinkle said that business owners must be alert to the new requirements. For example, beginning on Oct. 1, 2013, employers will have to distribute a list of health insurance exchanges to their employees. For employers that are offering health insurance next year, numerous changes are coming that will the policies (and the costs) they offer. These include: a rule that employers must offer one plan with a deductible of $2,000 or less; a maximum 90-day waiting period for offering insurance to a new employee; and new fees levied on insurance plans (which the plans may try to shift to employers and employees). “All this is still bearing down on employers,” Hinkle says.

As another example, Victoria Braden, principal with employee benefits consulting firm Braden Benefits Strategies, says that the new rules about employee income-verification will cause headaches for employers. These rules, encapsulated in a Final Rule issued on July 15, have relaxed the documentation that individuals need to show to qualify for healthcare subsidies. See, 78 FR 42159, Sec. II-C-11. “When we look at the requirements for individuals to receive subsidized coverage on the government exchange of our clients, 99% of those employed by a company offering health insurance do not qualify for a subsidy,” she says. “If the government is not verifying income, the result could be ineligible individuals receiving government-subsidized health insurance premiums.”

People inappropriately receiving government subsidies will cause headaches for their employers, says Braden. “How are employers going to work with employees who are paying less on the subsidized government exchange than their contribution to the corporate health insurance coverage? What are the consequences of an employee who does not financially qualify for the subsidized coverage? Will companies, where a non-qualified employee is receiving a subsidy on the government exchange, be subject to a fine?” she asks.

Conclusion

These are only a few of the many questions that will arise as employers and employees grapple with ACA in the years ahead. To stay top of the issues, the experts advise that employers and attorneys should read ACA links prepared by the Department of Labor, Department of Health and Human Services, the Treasury Department'and IRS. “Each of these departments has some authority over the new healthcare laws,” says Hinkle. “Though their initial releases might be too technical for someone who has not been following this closely, the FAQs are very helpful for all employers.”

Kevin Adler is the Associate Editor of FBLA. He can be contacted at [email protected].

With a one-year reprieve from the implementation of the employer mandate under the Affordable Healthcare Act (ACA; www.healthcare.gov/law), announced by the Obama Administration in early July, franchisees and small franchisors can breathe a sigh of relief. Over the next few months, they will not have to determine if they are covered by the employer mandate, select an insurance plan, and figure out which employees are covered ' nor will they have to set aside funds to pay penalties if they choose not to offer insurance. The delay was first announced by Mark Mazur, assistant treasury secretary for tax policy, on his blog on July 2 (see, “Continuing to Implement the ACA in a Careful, Thoughtful Manner,” Treasury Notes, and then formally announced by the IRS on July 9 'see, “Affordable Care Act Tax Provisions,” IRS.gov). However, the one-year delay is not a repeal of ACA, so the question for business owners is how can they use the upcoming year most effectively to prepare for the law.

Attorneys and employee-benefits experts say that the delay will have positive effects for business owners, but they caution that the time should not be wasted. “For small-business owners, such as franchisees, the delayed implementation of the employer mandate is good news,” says Stephanie Vasconcellos, an associate with Neal Gerber & Eisenberg in Chicago. “It gives them time to implement systems for tracking employees and hours and to research how to purchase cost-effective health insurance for full-time employees.”

Many firms are still only in the early stages of planning for the mandate, says Vasconcellos, and they were going to struggle to meet the requirements by Jan. 1, 2014. “These companies didn't have many options for healthcare and were looking at purchasing from the largest plan sponsor in their area,” she says.

Insurers will take advantage of the delay, too, which will have beneficial impacts for employers. Vasconcellos predicts that more insurers will join Small Business Health Option Program (SHOP; www.healthcare.gov/marketplace/shop) exchanges, which are a linchpin of providing affordable healthcare for small businesses. “SHOP exchanges ' were not going to be up-and-running in 2014,” she says. “In many states, there might have been one. With another year, these can be fully implemented.”

Complexity Remains a Challenge

Despite the delay, attorneys say that business owners have numerous challenges in understanding the complicated ' and unfinished ' regulations. “Many franchisees were scrambling to understand if they had to offer health insurance to their workers,” says C. Logan Hinkle, a partner with Burr & Forman, LLP, in Birmingham, AL. “Fast-food franchises, for example, have unique circumstances of many part-time workers and high turnover. So they have to understand the rules about full-time equivalent [FTE] employees, full-time workers and measurement periods for workers with variable schedules.”

Some of Hinkle's clients have been looking carefully at their work forces to identify key personnel to keep on full-time status, and which workers can be shifted to part-time so that they do not have to be offered health insurance, he says. “That has to be balanced against what you need to do to attract and retain good workers,” he adds.

Of course, it's tough for employers to make those types of decisions when they do not know what the final rules will be. Some of the crucial definitions under the ACA that will affect small businesses most directly have not yet been finalized. These rules will define an FTE, affirm whether 50 FTEs will be the threshold for the employer mandate, and set the time after which an employee must be offered coverage, among many other provisions. The proposed rules were published in January 2013 and were expected to be finalized already, says Vasconcellos. On the one hand, employers have a right to be angry about the delay, she says, but she suggests that there's a silver lining: “I think that the delay suggests that the burden might be lessened on employers when those final definitions are released.”

Changing those standards would be a relief to franchisees, says Sean Falk, owner of 12 franchises (including, Salsarita's Fresh Cantina, Great American Cookies, Mrs. Fields Cookies, and Pretzelmaker). Speaking at a hearing held by the House Committee on Ways and Means Subcommittee on Health on July 10, Falk asked for an increase in the 30-hour threshold that qualifies an employee as full-time to 40 hours a week and an increase in the 50 FTE-employee threshold. Falk, who currently has 43 FTEs, observed: “If my business grows and I create more jobs, I will also drastically increase my costs due to the employer mandate. This has unavoidable repercussions on my bottom line and is forcing me to reconsider opening new locations.” (A list of speakers at the July 10 hearing with links to their testimony is available on the Committee on Ways and Means website at http://1.usa.gov/13QLUX4.)

Impact of Mandate in 2014

Some parts of the employer mandate have not been delayed, and Hinkle said that business owners must be alert to the new requirements. For example, beginning on Oct. 1, 2013, employers will have to distribute a list of health insurance exchanges to their employees. For employers that are offering health insurance next year, numerous changes are coming that will the policies (and the costs) they offer. These include: a rule that employers must offer one plan with a deductible of $2,000 or less; a maximum 90-day waiting period for offering insurance to a new employee; and new fees levied on insurance plans (which the plans may try to shift to employers and employees). “All this is still bearing down on employers,” Hinkle says.

As another example, Victoria Braden, principal with employee benefits consulting firm Braden Benefits Strategies, says that the new rules about employee income-verification will cause headaches for employers. These rules, encapsulated in a Final Rule issued on July 15, have relaxed the documentation that individuals need to show to qualify for healthcare subsidies. See, 78 FR 42159, Sec. II-C-11. “When we look at the requirements for individuals to receive subsidized coverage on the government exchange of our clients, 99% of those employed by a company offering health insurance do not qualify for a subsidy,” she says. “If the government is not verifying income, the result could be ineligible individuals receiving government-subsidized health insurance premiums.”

People inappropriately receiving government subsidies will cause headaches for their employers, says Braden. “How are employers going to work with employees who are paying less on the subsidized government exchange than their contribution to the corporate health insurance coverage? What are the consequences of an employee who does not financially qualify for the subsidized coverage? Will companies, where a non-qualified employee is receiving a subsidy on the government exchange, be subject to a fine?” she asks.

Conclusion

These are only a few of the many questions that will arise as employers and employees grapple with ACA in the years ahead. To stay top of the issues, the experts advise that employers and attorneys should read ACA links prepared by the Department of Labor, Department of Health and Human Services, the Treasury Department'and IRS. “Each of these departments has some authority over the new healthcare laws,” says Hinkle. “Though their initial releases might be too technical for someone who has not been following this closely, the FAQs are very helpful for all employers.”

Kevin Adler is the Associate Editor of FBLA. He can be contacted at [email protected].