Feds delay penalty provision of Obamacare

An official with the U.S. Treasury Department said Tuesday that the Obama administration will delay penalties for large employers who do not provide health insurance coverage to workers under the Affordable Care Act.

Assistant Secretary for Tax Policy at the Treasury Department Mark J. Mazur said, “The Administration is announcing that it will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin. This is designed to meet two goals. First, it will allow us to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees.”

Formal guidance is expected within the next week.

“Over the past several months, the Administration has been engaging in a dialogue with businesses – many of which already provide health coverage for their workers – about the new employer and insurer reporting requirements under the Affordable Care Act (ACA). We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mazur said in this statement. “We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so. We have listened to your feedback. And we are taking action.”

In 2014, companies with 50 or more full-time equivalent workers, which could include groups of part-time workers, were expected to provide detailed information regarding employees’ tax information and related health insurance benefit details. If the information was not provided, employers would be subject to significant fines and penalties. The delay defers those negative consequences for one year.

Mazur said the Treasury Department would still “strongly encourage” employers to voluntarily implement the reporting information in 2014 “in preparation for the full application of the provisions in 2015.” His statement contended that the voluntary compliance would contribute to “a smoother transition to full implementation in 2015.”

“We recognize that this transition relief will make it impractical to determine which employers owe shared responsibility payments (under section 4980H) for 2014.

Accordingly, we are extending this transition relief to the employer shared responsibility payments. These payments will not apply for 2014. Any employer shared responsibility payments will not apply until 2015,” Mazur said.

ARKANSAS REACTION
“Initially, I was surprised, but after I had a chance to think about it, I’m not that surprised,” said Tom Kane, a senior vice president with Stephens Insurance. “They’ve never really thought this through. Now, we’re in the eleventh hour and employers and the government aren’t ready.”

Kane said that employers have struggled with guidance and potential compliance to calculate part-time and full-time employees as well as household income and other reporting requirements that the new law enacted.

Kane also suggested that more dominoes may fall after this initial Treasury Department delay.

“The big question for me is: what about the exchanges?” said Kane.

He argued that if the employer penalty mandates are lifted, then there could be discouragement or lack of direction for steering employees into exchange plans versus employer-sponsored private plans.

Arkansas Insurance Commissioner Jay Bradford said he doesn’t expect the state’s exchange to be impacted by today’s decision at all, and he’s relieved that the delay was announced.

“I’m not at all disappointed by the decision,” Bradford said. “What that does is take the pressure off businesses over 50 [employees] that have to comply with the Affordable Care Act.”

He said that the employer mandates were never designed to report income to determine exchange participation. A worker’s federal income tax statement, filed with the IRS, will determine exchange eligibility. The reporting requirements for employers were designed to determine penalties on businesses that did not comply with the law.

“The individual consumer is not going to be held back by this,” Bradford emphasized.

Randy Zook, CEO with the Arkansas State Chamber of Commerce, sees business and political ramifications from the decision.

“As a practical business matter, it’s a good thing. I think it’s smart on their part. I think a lot of bureaucrats as well as business people knew there was a lot to this process,” Zook said.

He also had expected 2014 to be a volatile year for politics as federal lawmakers dealt with potentially angry constituents who would be in the midst of acquiescing to reporting requirements.

“As a political issue, I’m not sure what it means,” Zook said.