The Obama Administration announced yesterday that the central employer compliance provision in the Patient Protection & Affordable Care Act, the so-called employer “Play or Pay” mandate, would be delayed until January 1, 2015.

Specifically postponed for one year is the healthcare reform law requirement that employers with more than 50 full-time employees offer minimum essential coverage to employees and their dependents, and further, that health coverage offered to employees meet tests of affordability and minimum value, originally scheduled to take effect starting in January 2014. Read more.

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“Play or Pay” Delayed: What’s Next for Healthcare Reform?

Wed Jul 3, 2013

The Obama Administration announced yesterday that the central employer compliance provision in the Patient Protection & Affordable Care Act, the so-called employer “Play or Pay” mandate, would be delayed until January 1, 2015.

Specifically postponed for one year is the healthcare reform law requirement that employers with more than 50 full-time employees offer minimum essential coverage to employees and their dependents, and further, that health coverage offered to employees meet tests of affordability and minimum value, originally scheduled to take effect starting in January 2014.

Swept into this one-year delay will be the IRC section 6055 and 6056 employer reporting requirements, any employer penalties associated with either not offering minimum essential coverage or offering unaffordable or bare-bones coverage and the entire edifice of worker hours tracking, including measurement and stability periods, intended to determine whether employees worked an average of more than 30 hours per week and therefore were eligible for mandated health coverage.

Put simply, employer “Play or Pay,” one of the most controversial and complicated compliance issues in the healthcare reform law, has been pushed back one year.

Why was this done? The White House and Treasury Department, in separate blog posts, blamed difficulties in crafting the employer reporting requirements on which “Play or Pay” penalties were to be assessed.

No doubt there is some truth to this. The reporting infrastructure that was to have linked employers, workers, state exchanges, IRS and insurance carriers was unprecedented in its Metadata requirements.

The official word is that the Administration is giving employers more time to comply. In reality, the Administration is giving IRS more time to comply. IRS and other government agencies proved unable to architect the sophisticated reporting loop that would connect all the participants. In the end they decided to shelve the reporting requirement for a year and with it the employer coverage mandate.

What are the implications? On first impression employers get a timeout—a one year delay in an obviously burdensome compliance requirement. But on reflection one has to wonder whether yesterday’s announcement reveals deeper fissures in the federal bureaucracy tasked with making the healthcare reform law operational in the real world.

After all, IRS has had more than three years to come up with a workable reporting requirement. Will they be any better prepared 12 months from now? One has to ask, is employer “Play or Pay” really doable?

How does this delay affect other 2014 deadlines? The individual mandate to purchase health coverage remains in effect—at least for now. But if fewer employers offer affordable coverage in 2014 because there are no “Play or Pay” penalties will more individuals turn to the state exchanges for coverage?

And if more people apply for exchange-based coverage, and presumably more tax credit subsidies to buy such coverage, won’t the budget costs of healthcare reform skyrocket? And since employer penalties won’t be available to help pay these subsidies, doesn’t this all mean that taxpayers will take a bigger hit?

Finally, will the state exchanges be up and running for open enrollment in less than three months and for coverage in six months time? Only 17 states and the District of Columbia have said they will stand up insurance exchanges. The federal government must operate exchanges in at least half the states. It’s anybody’s guess whether the exchanges will be open for business on January 1, 2014.

Yesterday’s announcement that the employer “Play or Pay” mandate would be delayed one year prompts us to contemplate two scenarios:

One, the “bump-in-the-road” scenario, i.e., everything is OK with healthcare reform implementation and detailed employer reporting was a small glitch that needs a bit more tinkering before it’s ready for prime time.

Two, the “snowball effect” scenario, i.e., delay in the employer mandate leads to delay in the individual mandate, which itself leads to delay in the opening of the state exchanges, which finally leads to a delay in 2014 implementation of healthcare reform.

At this moment it’s impossible to say which scenario will unfold. But the one-year delay in employer “Play or Pay” is a huge development in the train of healthcare reform. Three years on the Patient Protection & Affordable Care Act is off schedule. Whether it gets back on track in 2013 or falls off the track completely remains to be seen.