Sarah Ivy, Esq., Chair of the Employee Benefit and Executive Compensation practice at Giannascoli & Kent provided the following update;
Employers scrambling to comply with the Employer Mandate under the Patient Protection and Affordable Care Act scheduled to take effect January 1, 2014 can take a deep breath – the Employer Mandate has been delayed until January 1, 2015. On Tuesday, July 2nd, the Obama administration unexpectedly announced the delay of the Employer Mandate largely in response to the numerous concerns of employers about the challenges faced in complying with the Mandate. Within the next week, the Treasury department will issue official guidance regarding the delay. We will continue to update you as we receive additional information.
The Employer Mandate requires mid-sized and large employers (with 50 or more full-time employees and full-time equivalents) to offer qualified and affordable health insurance coverage to their full-time employees or to pay a penalty. The one year delay is intended to provide employers with additional time to update their health care coverage and better plan for the financial impact of the Employer Mandate without the threat of penalty, which could potentially cripple an employer’s ability to continue to operate profitably. Further, the Obama administration appears concerned that many employers intended to downsize their workforce and/or reduce employee hours to avoid the Mandate altogether, and is hoping it can simplify the Employer Mandate and its related reporting requirements consistent with PPACA.
Interestingly, there does not appear to be a resulting delay in the implementation of the Exchanges – or Marketplaces, which are set to become fully operational by January 1, 2014. The Exchanges, whether state-run or federal-run, will offer to basic, affordable health care coverage to all U.S. citizens. For those unable to afford coverage, subsidies will be given so that those needing health care are able to obtain such coverage. The penalties paid under the Employer Mandate are expected to provide financial support to the Exchanges. The big question now is, with the Employer Mandate delay, how does the administration expect to finance the subsidies granted through the Exchanges?