Affordable Care Act Delays Play or Pay Penalties
August 19, 2013
On July 2, 2013, the US Treasury Department announced that it is delaying enforcement of the employer “play or pay” penalties and reporting requirements found in the Affordable Care Act (ACA) for one year to 2015. The Treasury Department indicated that employers should still comply with the requirement to offer medical coverage to full time employees on a good-faith basis. However, without the penalties in place or the reporting requirements, this essentially gives employers another year to prepare for implementing plans compliant with the Act. However, it should also be noted that while these particular provisions have been delayed, other parts of the ACA have not been affected. One example is the requirement that employers provide notice to their employees of the health insurance exchange marketplace.
The purpose of the “play-or-pay” penalties is to expand healthcare coverage to many without it on employers with 50 or more full-time employees. Referred to as “shared responsibility payments,” they amount to penalties that will be paid for each employee who is not provided with the minimum coverage called for under the law. Penalties are also called for on most individuals who do not have coverage (“individual mandate”). The delayed enforcement of the pay-or-play rules until 2015 has also caused many to urge that enforcement of the individual mandate also be delayed, particularly in light of uncertainty as to how the state and federal insurance exchanges will open in the fall and operate in 2014.
This delay will provide employers with additional time to evaluate how to best implement plans in the future, or whether to simply pay the penalty. Many employers will choose to continue with their original plan of covering full-time employees, but will now have additional time to determine how best to track employee hours. The delay in implementation may also allow employers to monitor the success of state health care exchanges in 2014, to determine whether simply paying the penalty is a reasonable option.