The Obama Administration’s recent decision to delay implementation of the Employer Mandate and reporting requirements in the Affordable Care Act should be viewed as a welcomed move.
Namely, it’s an opportunity for U.S. businesses to prepare for the most significant changes to employee benefits since the enactment of Medicare. Now that they have this extra time, businesses and their agents should use it wisely. The new rules, along with associated expenses and operational challenges, will require a coordinated, staged strategy.
Impact of the Delay
The U.S. Department of Treasury’s decision to postpone the employer mandate until 2015 allows regulators to streamline the rules that businesses would be required to follow under the landmark legislation. More than 70,000 pages of regulation have already been written to implement the legislation.
Businesses that do not offer healthcare benefits to employees will not be subject to the penalty provisions under the ACA until 2015. The Obama Administration also postponed implementation of the employer reporting requirements until 2015.
For the majority of large employers, the delay will have no impact. Most large firms currently offer coverage to their employees. Small businesses with fewer than 50 workers were already exempt from the rules and will also see no changes.
The Treasury Department’s announcement pertains only to the employer mandate and the employer reporting requirements under the ACA. The decision does not delay the individual mandate, which requires Americans currently without health insurance to obtain coverage effective Jan. 1, 2014.
Managing the Big Impact
While businesses across America got a temporary break from employer mandate, Barney & Barney estimates costs will still double by 2020 in spite of the delay. The ACA will have significant impact in three ways.
First, the ACA is going to have a material negative impact on the bottom line. Costs are going to start rising each year between now and 2020, when they may be twice the current rate.
Second, the ACA will be an operational challenge that many companies haven’t encountered. The compliance, human resources and legal implications from the regulation will be significant.
Third, the law fundamentally alters the human capital strategy. It’s entirely possible that companies with more than 50 employees, which will bear the full brunt of healthcare reform, may decide not to add more workers.
What to Do?
The expense and complication of the ACA means that the role of brokers has never been more strategic. To prepare for the ACA, employers need to do the following:
- Model the anticipated costs of healthcare reform to understand the significant financial fallout you may face.
- Determine the best approach to providing health benefits based on the expense structure and needs. The key question: Should you execute a “play” or “pay” model?
- Decide whether a defined contribution plan is the best way to proceed.
Financial modeling is an essential step to developing a strategy to comply with healthcare reform. The starting point for the analysis should begin in 2014, with the modeling extending to 2020. Calculating all of the costs is critical to having a comprehensive understanding of the financial implications.
The financial and other impacts of the ACA will usher in the most sweeping change to benefits since the enactment of Medicare and Social Security. Companies and brokers should use the delay in implementing the rules to make sure they have a very good game plan in place.
To listen to a podcast interview on the ACA delays with Pynes visit: InsuranceJournal.tv.
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