Employer-Mandate Of The Health Care Reform Law Delayed Until 2015

In an unanticipated announcement by U.S. Department of the Treasury in an blog posting yesterday afternoon, the Obama administration has delayed for a year the employer-mandate, commonly referred to as “play or pay” provision, of the Affordable Care Act (“ACA”).  By way of background, the ACA imposes penalties on “large employers” (defined as those with 50 or more full-time equivalent employees) that either do not offer health coverage to employees or offer coverage that is either not “affordable” or does not provide “minimum value.”  The penalties may be up to $3,000 per employee per year.  The law also includes onerous reporting requirements for employers regarding health benefits offered to employees, including the value of the benefits offered, any applicable waiting period, the dates coverage was offered, to which employees it was offered, etc.  Penalties were to be assessed on a monthly basis beginning on January 1, 2014.

The administration announced, however, that it will provide an additional year, or until January 2015, before the “play or pay” penalty and reporting requirements take effect.  In a statement issued by the U.S. Department of the Treasury, the agency stated that this delay “will allow [the government] to consider ways to simplify the new reporting requirements consistent with the law… [and] will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees.”  Proposed rules regarding reporting obligations are expected later this year.

Notably, other key provisions of the ACA, including the implementation of the health care Exchanges and penalties on individuals who do not purchase health coverage, have not been affected by this announcement and will take effect on January 1, 2014.  The effect of the delayed “employer mandate” on these other key provisions remains to be seen, as well as whether the implementation of those provisions will similarly be delayed.  Until 2015, however, larger employers can breathe a sigh of relief.  They have additional time to – without the fear of penalties – review their options to either “play” by offering affordable health coverage that meets the minimum value requirements, or “pay” by electing to pay the penalty to the government.