The House of Representatives is scheduled to consider a package of bills that would make significant changes to employer requirements under the Affordable Care Act (ACA). Reports suggest the package will pass through the Republican-controlled House this week; however, chances of passage through the divided Senate seem unlikely.
The Save American Workers Act of 2018 (Act) proposes to:
- Suspend the ACA’s employer mandate for 2015 through 2018. The mandate would apply beginning in 2019, so the practical impact of the proposed suspension is to eliminate penalties for employers that previously didn’t comply. Passage would halt the IRS’s current attempts to enforce the mandate and would open the door for employers to obtain refunds from the IRS for any penalties already paid.
- Establish a 40-hour workweek for determining full-time status under the ACA’s employer mandate. Under the current rule, an employee is treated as full-time if she is credited with at least 30 hours per week. Employers subject to the mandate risk penalties for not offering medical coverage meeting certain requirements to full-time employees. The proposed change would alleviate penalty risks for employers that have employees working less than 40 hours but more than 30 hours per week. The change in definition could also reduce the number of small employers subject to the mandate.
- Further delay the Cadillac tax. The 40 percent excise tax applied to employer coverage that exceeds certain cost thresholds was originally slated to apply beginning this year, but it has been delayed multiple times. This newest proposal would make the tax effective in 2023 instead of 2022.
- Modify ACA reporting requirement. Current rules require any entity providing minimum essential coverage to annually report the fact of that coverage to qualified individuals and the IRS. This is often accomplished through IRS Form 1095-B for insured group plans and IRS Form 1095-C for self-insured group plans. The proposal would make such a report necessary to the individual only when the covered individual requests the report. Reporting to the IRS would still be required.
Lockton comment: If enacted, this change would do very little for employers subject to the employer mandate, because those employers would still have to separately report to full-time employees and the IRS that they complied with the mandate. That reporting is usually accomplished through IRS Form 1095-C. Employers subject to the mandate that have a lot of covered retirees, part-time employees or COBRA beneficiaries could see a minimal benefit to the rule change.
While we suspect many employers will welcome the changes proposed by the Act, it is important to note that the Senate is unlikely to give it any serious attention. The next few weeks in the Senate are likely to be dominated by fights on the nomination of Brett Kavanaugh to the Supreme Court and the need to fund the government to avoid a shut down on Sept. 30. The coming midterm elections will make it politically risky for the Senate to vote on changes to the ACA. Nonetheless, Lockton Government Relations will continue to monitor the progress of the Act and provide an update in a forthcoming alert.
Update Sept. 14, 2018
The House postponed a vote on the package in light of Hurricane Florence. Consideration of the Act has been pushed back to the week of Sept. 24.