Delays, You Can't Just Have One. The Obama Administration Significantly Delays and Revises PPACA's Employer Mandate Again

*By Patrick J. Hoban

On February 10, 2014, the Department of the Treasury (“DOT”) and the Internal Revenue Service (“IRS”) issued final regulations for the Employer Shared Responsibility provisions of the Patient Protection and Affordable Care Act (“PPACA”). These final regulations, effective on January 1, 2015, delay full implementation of the Employer Mandate once again, in addition to clarifying and revising regulations governing enforcement of the Employer Mandate in the future.

As employers have become all too aware, PPACA requires that “applicable large employers” must offer group health insurance coverage to their full-time employees (and their dependents) or potentially face fines. To avoid potential fines, applicable large employers must offer coverage to at least 95% of their full-time employees (and their dependents). PPACA defines applicable large employers as those that employed an average of at least 50 full-time employees (including full-time equivalents) during the preceding calendar year. “Full-time” employment under PPACA is defined as an average of 30 hours of “service” per week (including all paid hours, actually worked and paid time off).

When enacted in March 2010, the Employer Mandate, including the potential for employer fines, was scheduled to take effect on January 1, 2014. As that date approached, employers struggled to evaluate the costs of either offering coverage to previously uncovered employees or paying fines. Several large, national employers announced reductions in employee hours to avoid Employer Mandate fines. As it became clearer that the administrative burdens and potential costs of the Employer Mandate would significantly burden many employers, in July 2013, the Obama Administration effectively suspended enforcement of the Employer Mandate for all applicable large employers until January 1, 2015.

In the face of continued outcry from employers, and after the glitch-plagued rollout of the Healthcare.gov website, the Administration has again delayed full implementation of the Employer Mandate. The final regulations issued on February 10, 2014, split applicable large employers into two categories and further delayed the Employer Mandate as follows:

The first category is employers with more than 50 but fewer than 100 full-time employees (including full-time equivalents) which are not subject to the Employer Mandate, or potential fines, until the later of January 1, 2016 or after the last day of a 2015 plan year ending in 2016 (e.g., plan year runs from July 1, 2015 through June 30, 2016). Applicable large employers claiming they have fewer than 100 full-time employees must also meet all of the following conditions:

• Employ at least 50 but fewer than 100 full-time employees (including full-time equivalents) during 2014;
• Not reduce the number of employees or employee hours of service to fall below 100 full-time employees (including full-time equivalents) between February 9 and December 31, 2014 to avoid Employer Mandate fines (excluding workforce reductions for “bona fide business reasons”);
• Not eliminate or “materially reduce” health coverage offered as of February 9, 2014 (including the employer share of premium contributions); and
• Certify to the IRS that it meets the above conditions (e.g., the employer must certify that it has not reduced its workforce to avoid Employer Mandate fines).

The second category is employers with 100 or more full-time employees which are subject to the Employer Mandate and potential fines starting January 1, 2015. However, employers in the second category are not subject to fines if they offer coverage to at least 70% of their full-time employees (and their dependents) until the later of January 1, 2016 or the last day of a plan year beginning in 2015.

Under the regulations issued on February 10, 2014, all applicable large employers (those employing 50 or more full-time or full-time equivalents) will be subject to the Employer Mandate as set forth in the statute as of the later of January 1, 2016 or the last day of a plan year beginning in 2015.
Additionally, the final regulations clarified and revised several issues, including:

• “Dependent” Definition. The final regulations confirmed that spouses are not considered “dependents” to whom an employer must offer coverage to avoid Employer Mandate fines. The final regulations also exclude foster children and step children from the definition of dependent.
• Breaks in Employment. The final regulations lowered the standard for breaks in employment allowing an employer to treat a former employee as a “new hire” for purposes of calculating full-time status under the Employer Mandate to 13 weeks from 26 weeks.
• Transitional Guidance. The final regulations provide additional guidance for employers regarding how and when to implement the optional “safe harbor look-back periods” for determining whether employees are full-time under the Employer Mandate.

The new regulations provide additional time for employers to consider how to comply with the Employer Mandate. However, in the face of ongoing uncertainty as to PPACA’s long term effect on health insurance costs, they do nothing to alleviate employer cost concerns and will likely increase administrative burdens and costs of compliance. It is unknown whether the Administration will announce further delays in implantation of or changes to the Employer Mandate. Employers can only keep track of these changes and evaluate their options accordingly. Unfortunately, when it comes to PPACA, the only certainty is that there is no certainty.

*Patrick J. Hoban, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of private and public sector labor relations. For more information about PPACA or labor & employment law, please contact Pat (pjh@zrlaw.com) at 216.696.4441.