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Affordable Care Act Employer Mandate Penalties to be Delayed One Year

On July 2, 2013, the United States Department of Treasury (DOT) announced that the enforcement of the penalty for large employers not offering health insurance to its employees under the Affordable Care Act (ACA) will be delayed until January 1, 2015. This provision is known as the employer mandate.

The employer mandate is one of the key provisions of the ACA, and requires that large employers pay a penalty for every month they fail to offer full-time employees and their dependents the opportunity to enroll in an employer-sponsored health insurance plan. A full time employee is defined as an employee who works at least 30 hours per week. The penalty was originally one-twelfth of $750 per employee, but in 2010 under reconciliation legislation the penalty was raised to one-twelfth of $2000 per employee for every month the employee is not offered the opportunity to enroll in the employer-sponsored plan. A “large employer” is defined in the ACA as an employer who employs an average of at least 50 full time employees on business days during the preceding year. Included in the number of full-time employees is the number of part-time employees multiplied by the aggregate number of hours they worked for the month, divided by 120.

According to the DOT announcement, the Administration decided to delay the employer mandate as a result of concerns from the business community regarding the complexity of the employer mandate, and businesses requests for more time to implement the mandate effectively. The delay will allow the Administration to consider how to simplify the reporting requirements under the ACA, and give more time to businesses to adapt to the ACA standards. The DOT committed to publish formal guidance for this transition within the week.

Furthermore, the DOT announced that it would publish proposed rules implementing information reporting by insurance providers. Once this information is published, the Administration hopes that employers will willingly incorporate information reporting in 2014 to make the transition smoother to full enforcement in 2015. The announcement makes it clear that no other provision of the ACA has changed, including the employee’s access to premium tax credits. Some economists believe that the delay of the employer mandate delay will improve the job rate over the next year, as employers will be able to hire more than 50 workers and increase hours for current workers to above 30 hours a week. However, under the ACA, a business is considered large if it has 50 full-time employees during the preceding calendar year. Therefore, businesses determined to still be considered small will not likely hire more than 50 employees regardless of the ACA change.

According to Modern Health Care, the DOT’s announcement has already had a negative effect on hospital stocks, as this delay means less volume of insurance plan purchases and in turn less hospital visits, as well as more uncertainty regarding the mandate than investors had anticipated. Wachler & Associates will continue to keep you updated on important Medicare and Healthcare Law News. If you would like to subscribe to the Wachler & Associates Health Law Blog, please add your email address and click subscribe in the window on the top right of this page.