8 reasons for employers to keep their PPACAguard up

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Forget the delays for a minute. Here's what the national lawfirm Bryan Cave had to say about which PPACA provisions remain ineffect for employers in the year ahead.

  1. Summaries of Benefits and Coverage must be distributed duringopen enrollment for the 2014 coverage period and must indicatewhether the plan provides minimum value, as defined underPPACA.
  2. Exchange Notices: Employers must distribute PPACA exchangenotices to employees by Oct. 1, 2013, and thereafter to newemployees upon hire.
  3. Application for Advance Premium Credits: Employers are requiredto complete a 12-page form, “Application for Health Coverage andHelp Paying Costs,” when requested by employees who are applyingfor PPACA advance premium tax credits when purchasing coverage viaan exchange.
  4. PPACA fees: Patient-Centered Outcome Research Institute Fees(“PCORI Fees”) must be paid in July 2013 (that's now!). The firsttransitional reinsurance fee must be paid on or before Jan. 15,2015.
  5. W-2 reporting: Employers must continue to report the aggregatevalue of health coverage on Forms W-2.
  6. Counting Period for Employer Mandate: Employers that need todetermine whether they will be subject to the employer mandate in2015 (50 or more full-time or full-time equivalent employees in2014) will need to record employee hours in 2014. It's not yetclear whether a short counting period will be available, whichmeans that employers may be smartest to begin to track hours on aper-employee, monthly basis on Jan. 1.
  7. Benefit Mandates For All Plans: Plan design requirements forall plans continue to apply (e.g., maximum 90-day waiting period,no limits on pre-existing conditions or essential health benefits,expansion of wellness incentives, dependent coverage to age26).
  8. Benefit Mandates for Non-Grandfathered Plans Only: Plan designrequirements for non-grandfathered plans only continue to apply(e.g., preventive care coverage requirements, limits onout-of-pocket maximums, etc.)

—Dan Cook

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A quiet week usually reserved for barbecues,family get-togethers and a day or two off from work turned morecomplicated than anyone expected when PPACA stalled out on the wayto full implementation. The Obama administration announced July 2it would delay the employer mandate penalty for one year.

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One of the key provisions of the Patient Protection andAffordable Care Act requires employers with 50 or more employees toprovide health coverage or pay steep fines. But the TreasuryDepartment announced in a blog post that penalties will be on holduntil 2015 due to alleged concerns from employers over thechallenges of its implementation.

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“We have heard concerns about the complexity of the requirementsand the need for more time to implement them effectively,” Mark J.Mazur, assistant secretary for tax policy, wrote in a blog post onthe Treasury Department's website.

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“We recognize that the vast majority of businesses that willneed to do this reporting already provide health insurance to theirworkers, 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.”

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Just days later, the administration even more quietly released a606-page rule that spelled out other delays, including pushing backuntil 2015 the law's requirement that the new exchanges verifyconsumers' income and health insurance status, when strongerverification systems are in place. In the meantime, the governmentwill rely on consumers' self-reported information.

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Made without fanfare, the announcements stunned and confused awide variety of stakeholders.

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Here's what it all means.

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For employers

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For the most part, business groups welcomed the news that theadministration had delayed the penalty.

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Randy Johnson, senior vice president of the U.S. Chamber ofCommerce, called it “a pleasant surprise,” adding that the Chamberhas testified several times about the problems with themandate.

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The National Retail Foundation, a constant PPACA critic, saidthe delay is a “wise move.”

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“This one-year delay will provide employers and businesses moretime to update their health care coverage without threat ofarbitrary punishment,” NRF vice president and employee benefitscounsel Neil Trautwein said.

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The American Benefits Council also applauded the move, saying itprovides “vital breathing room to implement the law in a morethoughtful and administrable way.” The advocacy group foremployer-sponsored benefit programs said it had been workingclosely with the Obama administration to “mitigate whereverpossible the cost and burdens of implementing the ACA.”

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Although the requirement applies to only 3 percent of thenation's employers—the vast majority of whom already provideinsurance—the rule is still seen as burdensome and confusing.

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PPACA requires employers with more than 50 full-time workers toprovide health insurance or pay steep fines. Various studies andemployer polls found that numerous companies would lay offemployees or cut their hours to dodge the mandate.

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Now, there's the potential that some employers may unfreezetheir hiring plans without worrying about the consequences. That'sone piece of good news, employers say.

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But for others, the delays raise more questions.

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Employers who already had made efforts to comply with the rulesare now confused or frustrated. For others, the delays don't matteror change their plans because the companies were alreadyprepared.

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Though there's more time to adjust, employers need to understandthe delays don't give them a “free pass,” explains JulioPortalatin, president and CEO of consulting firm Mercer.

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“We expect employers to stay 100 percent focused on costmanagement,” he says.

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In the short term, Mercer estimates, new fees,plan design changes and the expectation of additional enrollmentwill add an estimated 2 percent to 3 percent or more to health plancosts in 2014, even if employers table plans to extend coverage toall employees working 30 or more hours per week.

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Still, employers can take advantage of the move and spend thetime shopping around for the best and most cost-effectiveplans.

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The bottom line? Employers have more time to prepare for theinevitable.

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For brokers

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The delays give brokers a more important role than ever,industry insiders say.

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Shortly after the administration's announcement, JanetTrautwein, CEO of the National Association of Health Underwriters,encouraged employer groups to “seek counsel from an experienced,licensed health insurance agent” for questions, concerns andadvice.

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“These professionals can help employers prepare for the new 2015deadline, as well as assist in finding affordable plans that fitthe needs of employees and their families,” she said.

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David Smith, vice president of health and welfare benefits atNorth Carolina-based Ebenconcepts, says that though the PPACAdelays are keeping brokers and agents on their toes, it's anexciting time to be in business.

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Successful agents and brokers, he says, need to keep abreast ofthe changes and inform clients about the law's ongoingimplementation.

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Smith, for one, says he informed his clients of the changesimmediately.

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Overall, the delays should give brokers and agents a chance toplay catch-up, says Digital Insurance President and CEO AdamBruckman.

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“We've been working diligently for several years in preparationfor [PPACA's] numerous provisions, and we'll continue along thesesame lines,” he says. “More time is always welcome news andprovides some relief for those affected by it most.”

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For other brokers, the delays confirm suspicions about PPACA andits implementation.

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Brandon Scarborough, co-founder of Power Groupworksite division and PowerEnroll at Power Group Cos. in OverlandPark, Kan., says the delays are “significant.”

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“It begs the question: What might be next in terms of delayedimplementation?”

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“If taken at face value, it's surprising this is where theadministration sees the greatest need for 'simplification,'” hesays. “The construction and integration of the federal data hub andexchange marketplaces seem far more precarious at this point. Thepay-or-play rules, controversial or not, have been pretty clearlydefined.”

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For insurers

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America's Health Insurance Plans, the nation's largest carriergroup, has long warned that PPACA is harmful and burdensome tohealth insurers.

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Robert Zirkelbach, an AHIP spokesman, said shortly after theannouncement that AHIP is appreciative of the administration'sresponse to employer and insurer concerns.

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But some experts warn that the PPACA delays actually might hurtinsurers.

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Steve Zaharuk, a senior vice president at Moody's InvestorsService, warned about the possible effects of the changes in arecent credit outlook commentary.

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Though the changes could increase individual health policysales—with more individuals shopping for coverage through theexchanges—insurers might have a problem because they've pricedtheir products based on the assumption that PPACA will be fullyimplemented.

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If the government puts off implementing some parts of PPACA, theactual demographics of individual market coverage applicants couldbe different from what insurers had expected, Zaharuk says.

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“Obviously, a less healthy population would result inhigher-than-anticipated medical costs,” Zaharuk writes. “This riskis likely, as we expect there will be individuals who use thisopportunity to obtain subsidized insurance in 2014 for electiveprocedures, driving up medical costs.”

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The insurers that bring in thosecostlier-than-expected enrollees could face higher customer-servicestaffing costs, as well as higher-than-expected medical costs.

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Meanwhile, some individuals who buy individual exchange coverageas a result of the temporary implementation changes could droptheir coverage in 2015, when the temporary changes end, Zaharuksays.

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For insurers, the possibility that many new individual policycustomers could rush out the doors in 2015 will make pricing andstaffing difficult.

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If exchanges and state regulators let health insurers changetheir 2014 rates to compensate for the new regulatory uncertainty,that “would somewhat mitigate the negative implications,” Zaharukwrites.

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For consumers

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For some employees, the delays mean they may be turning to theexchanges to buy health insurance when they may not have previouslyplanned to do so. And the impact on their pocketbooks isunclear.

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The original intent of the employer mandate—proponents havesaid—is that it's a “firewall” to prevent employers from dumpingtheir low-income employees onto the exchanges, where they would beeligible for substantial subsidies at taxpayer expense. But thatfirewall is now dismantled with the delays.

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Health Partners America, a leading brokerage training firm inBirmingham, Ala., warns the delay will cause more employers to droptheir group health insurance and send their workers to theindividual market to find coverage.

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The reporting delay also means that for a year, consumers willbe on the honor system for subsidies under the Patient Protectionand Affordable Care Act.

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Anyone willing to claim eligibility will be able to obtainexchange coverage and (in the case of about two-thirds ofhouseholds) the premium subsidies that go with it.

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Consumers, experts warn, could easily take advantage of the newlax reporting to get cheaper coverage.

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These are big consequences.

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But perhaps the biggest implication of thelaw's delays on consumers will be furthering confusion.

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The majority of Americans don't understand how the law works orwhen it takes effect, and the continued delays might only muddlethe issue further.

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For the government

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Though the administration has claimed the delays are a result of“careful and thoughtful consideration,” others argue they'relargely a political move—to wait under after the midterm elections.The delays also have raised many eyebrows among political punditsand benefits experts alike.

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The Obama administration insists that despitethe delays, the rest of the law will keep rolling along. Among thepromises is that the exchanges—the central piece of PPACA—will openup on time Oct. 1. That's an important milestone, and one many arewatching.

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But it's not a given: A Government Accountability Office reportdiscovered Obamacare exchanges are behind schedule, underscoringthe challenges the administration has in the coming months.

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The delays have given Republicans and other critics more ammo tocontinue their attacks against PPACA.

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Senate Minority Leader Mitch McConnell said the delay confirmsthat “Obamacare costs too much and it isn't working the way theadministration promised.”

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Critics are continuing their crusade against PPACA in itsentirety. Some are now arguing that the employer mandate should notjust be delayed; it should be repealed. And others are focusingtheir efforts on delaying the individual mandate.

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The employer mandate delay is the biggest delay of the law yet,but it wasn't the first.

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Earlier this year, the administration delayedby one year its Small Business Health Options Program, a move thatmany small business owners called a “major letdown” for theiremployees looking for a competitive marketplace for healthinsurance options.

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The latest delays also mean more might be coming, analysts andother industry insiders warn.

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“I expect to see more delays and missed deadlines,” says TroyUnderwood, president and CEO of Benefits Connect, adding that hewas not at all surprised by the recent delays. “Platitudes,political favors and hope never replace a solid and realistic plan.As an expert in the processing and administration of employeebenefits, I can tell you the government's efforts, even if wellintentioned, are grossly inefficient.”

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Smoker penalties delayed, too

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A computer system glitch is the cause of the latest PPACA delay.And it's giving smokers a break.

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The glitch could limit penalties under the law for mostsmokers—but at the same time raise insurance costs for youngertobacco users.

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Under PPACA, insurers are prohibited from denying insurance tothose with a preexisting condition. But they are allowed to chargemore based on age and tobacco use. They can charge a smoker asurcharge of up to 50 percent.

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But the new computer mistake is sparing them.

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Until at least 2015, the software won't accept any plans thatcharge one person more than three times what another person ischarged.

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Industry insiders say the delay will either cause insurers tocharge older smokers and younger smokers the same penalty. Thatmeans either older smokers will get a temporary break, or youngersmokers will pay more than they would have.

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The Department of Health and Human Services assured it's “atemporary circumstance that in no way impacts our ability to openthe [subsidized insurance] marketplaces on Oct. 1.”

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