ACA Creates Hassle to Prove Health Coverage

Employers have made their opinion about the Affordable Care Act (ACA) excise tax clear, but there is another provision that irks them nearly as much, and that is the “play or pay” rule—the mandate to offer coverage that meets ACA requirements or pay a penalty.

In a recent survey of 644 employers, Mercer asked employers what changes they would like to see made to the ACA. Repealing the excise tax was first, with 85% in favor, but repealing the employer mandate was second, favored by 70%.

“It’s not because they don’t want to offer coverage. It’s because proving that they offer coverage is so much work,” said Tracy Watts, Mercer’s leader for health reform.

The deadline for reporting to the Internal Revenue Service (IRS) about coverage in 2015 was extended from January to June, and at this point most employers have a handle on their results. Virtually none of the survey respondents believe they will be liable for the “a” assessment—meaning they all offered coverage to substantially all employees working 30 or more hours per week. Just 8% thought they might be at risk for the “b” assessment—meaning that some of their employees might qualify for, and obtain, subsidized coverage on the exchange because the employer’s plan did not offer affordable contributions or meet minimum plan value requirements. 

About three-fourths of survey respondents said their enrollment levels have not changed due to the ACA. While 22% have seen an increase in enrollment, most said that was slight (less than 5%), and 4% of respondents said enrollment has decreased. The most recent Congressional Budget Office (CBO) study reports virtually no change in the number of people obtaining health insurance from their employer since the law was passed. This year, 155 million people, or 57% of the population younger than 65, will receive employment-based coverage.

When asked about the impact of the ACA on their organization, 20% of survey respondents said they have experienced higher costs, and 29% said they have made unwanted plan design changes to avoid excise tax exposure. At the same time, 84% said that the additional administrative burden has had a significant impact—and 51% described it as “very significant.”

In addition, the requirement to offer coverage to “substantially all” employees working 30 or more hours per week will get harder to meet this year, when the definition of “substantially all” increases from 70% to 95%. Limited duration employees, such as long-term temps and interns, could trigger an assessment. About one in four respondents said they will pull back on use of these workers, and another 16% are considering it.

“More than half of Americans already get their health insurance from their employer, and three out of four workers are satisfied with their health benefits,” says Watts. “Under play or pay, employers have had to modify their plans, track worker hours, manage eligibility and report coverage to prove they are doing something they have been doing all along.”