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Delay of health reform mandate has employers making hard benefit choices

Originally posted July 14, 2013 by Jerry Geisel on https://www.businessinsurance.com

Some employers may offer health insurance despite mandate delay.

Affected employers face some tough decisions on what approach they will take in the wake of the Obama administration’s unexpected decision to delay a key health care reform law provision.

Administration officials this month delayed by one year to 2015 the Patient Protection and Affordable Care Act requirement that employers with 50 or more employees offer qualified coverage to at least 95% of their full-time employees or pay a $2,000 penalty for each full-time employee.

U.S. Treasury Department officials said the delay was necessary to give the agency more time to simplify how employers are to file health care plan enrollment information with the government.

That delay is being welcomed by employers, especially those who have not decided whether they will offer coverage to those not currently eligible; or, if they have decided, the generosity of the coverage they will provide.

“This is a rare opportunity where an employer can make a smart and thoughtful decision,” said John McGowan, a partner with the law firm Baker & Hostetler L.L.P. in Cleveland.

Some employers, especially those that already have told affected employees that they will expand coverage, are less likely to reverse course and hold off that expansion for another year.

“If you already have figured out your strategy, you probably will implement it,” said J.D. Piro, a senior vice president with Aon Hewitt in Norwalk, Conn.

For example, Cumberland Gulf Group in June announced that, effective Oct. 1, employees working as few as 32 hours a week will be eligible for group coverage, down from the current 40-hour-a-week requirement.

Employees working 30 or 31 hours a week will be given the option of working 32 hours to become eligible for coverage in the company’s self-insured plans. For employees who work less than 30 hours, the company will assist them in finding coverage through public insurance ex-changes.

Through that expansion of coverage, which will affect about 1,500 employees, Cumberland Gulf, a $15 billion Framingham, Mass.-based company that owns convenience stores and the Gulf Oil brand, will be shielded from the health care reform law’s $2,000 per-employee penalty, which is triggered when coverage is not offered to full-time employees — those working at least 30 hours per week.

That expansion of coverage will remain on track, said John McMahon, Cumberland Gulf’s senior vice president and chief of human resources.

“We are going to continue on the path we have laid out. Our strategy is to create a great place to work and to be an employer of choice,” Mr. McMahon said, adding that the company is getting very positive feedback from current and prospective employees.

Other employers who also have announced plans to expand coverage eligibility, though, may find themselves between a “rock and a hard place,” said Ed Fensholt, senior vice president and director of compliance services for Lockton Benefit Group in Kansas City, Mo.

Those employers “will have to weigh the cost savings by pulling the plug for a year with the confusion and damage to employee relations that would occur,” Mr. Fensholt said.

Employers that do not offer coverage to all eligible employees and have not made final decisions on whether they will expand coverage also face issues.

For example, if they wait until 2015 to offer coverage, they could be at a disadvantage if their competitors decide to extend coverage next year, said Steve Wojcik, vice president of public policy at the National Business Group on Health in Washington.

There are other issues for employers not currently offering coverage to consider. By not offering coverage, their lower- and middle-income employees will be eligible for premium subsidies to purchase policies from insurers offering coverage in public insurance exchanges.

Then, in 2015, when the coverage mandate kicks in, the employer could offer a plan that is just rich enough to pass the law’s minimum value test, denying employees the government subsidies for exchange coverage they received in 2014.

“Then, you have an employee relations issue,” Mr. Fensholt said.

That issue will be less likely to develop, experts say, if the employees received employer coverage beginning in 2014 and never enrolled in exchanges.

“Some employees will be disappointed. It could be an awkward situation,” said Frank McArdle, an independent benefits consultant in Bethesda, Md.

Still, there are plenty of employers not providing coverage who will decide against offering coverage in 2014.

Employers “may not want to move forward until the dust settles. Some are wondering if the regulations and requirements will actually change during this interim period,” said Michael Thompson, a principal with PricewaterhouseCoopers L.L.P. in New York.

In addition, by waiting, employers will have a better sense of whether Congress will act in the coming months to change the employer mandate, experts say.

For example, prior to the Treasury Department delay, bills were introduced that would change the definition of a full-time employee to those working 40 hours a week — compared with the law’s 30-hour threshold — while other measures would exempt more small employers from the requirement to either offer coverage or pay the $2,000 per-employee fine.

While it is difficult to imagine Congress reaching a bipartisan consensus, “anything is possible,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.