In a second blog post about how mid-term elections could affect the Affordable Care Act, we evaluate the prospects for change in Employer Shared Responsibility -- the Play or Pay mandate.   

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The Elections and ACA Compliance: What to Expect—Part 2

Thu Oct 16, 2014

The November 4 Congressional elections could have a big impact on Affordable Care Act compliance next year and beyond.

Part 1 of this blog outlined two Election Day scenarios for ACA compliance—(1) a status quo U.S. Senate and no change in the healthcare reform law; and (2) Republicans winning control of the Senate, setting up 2015 “surgery” on the ACA.

Part 2 evaluates the prospects for change in Employer Shared Responsibility—the Play or Pay mandate.

In scenario two the first question would be, why not simply jettison the employer mandate? A case will be made that the mandate isn’t really necessary because 90% of firms with between 50 and 99 employees and 94% of those with over 100 employees already offer health benefits.  Nevertheless, complete repeal isn’t likely for four reasons:

First, as Part 1 explained, President Obama’s power to veto legislation means Congress must win his buy-in on any ACA changes. The President is not likely to accept repeal of one of the pillars of his domestic legacy.

Second, “shared responsibility” is a tenet of the ACA, with individuals, employers, insurance issuers and governments working together to expand access to health coverage for the uninsured.

Third, the original ACA features a “Dual Mandate”—that individuals have health coverage and employers offer health coverage. It would be politically difficult to repeal the employer mandate and not the individual mandate.

And finally, statutory penalties for non-compliance with the employer mandate, estimated in the tens of billions over ten years, are an important source of funding for the subsidies ACA provides to help people pay their insurance premiums.

While total repeal of employer play or pay seems unlikely, it’s possible that major surgery on the mandate could significantly change its practical impact on employer compliance.

What specific provisions might go under the congressional scalpel?

One could be the threshold employer size that triggers the mandate. ACA defines a “large” employer as one with 50 or more full-time employees. Expect a Republican-majority Congress to shield more small firms from Play or Pay by pushing this number higher—to 200 or more full-time employees.

Another target might be the definition of “Full-Time Employee,” i.e., workers who average 30 or more hours a week. Congress might try to raise this standard to 40 hours a week, possibly allowing the states to go lower if they choose.

Finally on the surgery list might be annual employer reporting of employee health coverage information—Code sections 6055 and 6056. IRS says this provision is essential for its enforcement of the individual and employer mandates. Still, annual reporting represents a huge compliance burden for employers of all sizes.

Expect Congress to dissect IRS’s final regulations on reporting possibly to permit more self-certification—perhaps broader use of Indicator Codes as opposed to detailed health coverage metrics.

Brightening the prospects for Capitol Hill and White House compromise on a 2015 ACA Amendments Act, to be sure, is Democrats’ own agenda to “fix” the unpopular law.

Among their priorities would be clarification that enrollees in the federal exchange are eligible for premium tax credits—rendering moot a possible Supreme Court challenge. Democrats are also eager to change the ACA “affordability” test to make family members eligible for subsidies even if an employee enrolls in self-only coverage.

Election Day is now less than three weeks away and no one can predict how the electorate will vote. Historically a president’s party has lost seats in the sixth year of an eight-year term of office.

If Democrats lose their Senate majority expect some changes in policy, especially in the Affordable Care Act. Four-plus years after its enactment no consensus yet exists on this landmark healthcare reform law. ACA change could come in 2015, and with it, the beginning of compromise on how to improve America’s health insurance system.