A major provision of the Healthcare law that would require employers to provide health insurance for their workers has been delayed until 2015. The part that is delayed: the requirement that businesses with more than 50 employees provide health insurance to their workers or pay a penalty. Businesses with more than 50 employees would have paid a fee of $2,000 per uninsured employees after the first 30 employees. The Congressional Budget Office expected those penalties to bring in $4 billion in 2014. Employer Mandate Penalties Delayed Until 2015 - legislative brief.
Jackson Hewitt Tax Service pointed out 4 potential effects of Tuesday’s announcement delaying the implementation of the Affordable Care Act's employer mandate:
- Fewer employers may cut employee hours in 2014. This one-year respite may make employers (e.g., restaurant and retail establishments) less likely to reduce employee hours below 30 hours per week (so as to classify such employees as part-time for section 4980H penalty calculations).
- Many families with children will have an unexpected benefit. For employers who offer employee but not dependent coverage, this one-year delay may also cause employers to postpone any offer of coverage to dependents. This may have a positive effect on such families for two reasons. First, children without an offer of employer-sponsored coverage may be eligible for the Children's Health Insurance Program (CHIP) if they meet the state-specific income and other eligibility requirements. Second, children without an offer of employer coverage may be eligible for the new premium assistance tax credits in 2014 even if their incomes are above the state-specific CHIP limit. Indeed, employers may be more likely to cooperate with enrollment efforts to get uninsured employees and their uninsured dependents covered under various ACA programs because they know with certainty that they will not face a penalty in 2014.
- States may face less pressure from business interests to expand Medicaid. Jackson Hewitt had released a report earlier this year estimating that American employers would incur $876 million to $1.3 billion in penalties in 22 states that were refusing to expand their Medicaid programs as contemplated under the ACA. Today's decision effectively removes that penalty liability for 2014. However, employers will continue to face such penalties in 2015 and thereafter in states that do not expand their Medicaid programs.
- The Treasury action today addresses anxiety among employers about the lack of final regulations from the IRS. While many employers with large part-time and seasonal employees embraced the flexibility afforded to them by the IRS's proposed approach, they voiced increasingly loud concerns that the IRS had yet to finalize this approach in a final rule. Indeed, the IRS has not publicly pledged to finalize these proposed rules before the major provisions of the ACA take effect in 2014. In an unexpected development late Tuesday, though, the Treasury Department effectively moots this issue for 2014.
Other key parts of the law, including the health exchanges where individuals can buy insurance, are on schedule. The exchanges will open on Oct. 1, wrote Valerie Jarrett, a senior adviser to President Obama, in a White House blog released Tuesday.
The delay also does not change the individual mandate, which requires most Americans to purchase insurance. Some consumers may receive subsidies to help them pay for the insurance depending on their incomes.
The government still encourages businesses to voluntarily begin reporting in 2014 so they will be ready for 2015. The administration is strongly encouraging employers to maintain or expand health coverage during the 2014 transition period.
Various parts of the law have taken effect since its passage in 2010, including allowing children up to age 26 to remain on their parents' insurance plans and discounts for prescription drugs for Medicare patients. More young Americans have health insurance than before the law, because of that change, and the discounts have saved Medicare recipients billions of dollars.
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