ACA employer mandate delay may mean more patients in exchanges

Observers predict the overall impact on doctors will be minimal, but unknowns remain about exchange network size and pay rates.

By — Posted July 15, 2013

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Although it's not expected to affect the 2014 coverage calculus significantly, a year-long delay of the Affordable Care Act's employer insurance mandate could mean that doctors end up treating more patients with health insurance exchange individual coverage than expected.

The U.S. Treasury announced July 2 that it will postpone until 2015 the law's mandate requiring that employers with 50 or more full-time employees offer insurance, also delaying a series of reporting requirements on insurers and employers regarding their covered individuals. Mark J. Mazur, the Treasury Dept.'s assistant secretary for tax policy, explained in a memorandum that the decision was made to give affected companies more time to modify their coverage and reporting systems, and the administration more time to simplify these requirements further.

Eligible employers under the mandate that didn't offer minimum coverage to workers faced tax penalties if those employees obtained subsidized plans on health insurance exchanges. Those subsidies remain unaffected by the delay, but the penalties will not apply to companies.

“We have heard concerns about the complexity of these requirements and the need for more time to implement them effectively,” Mazur wrote. Proposed regulations on the business reporting requirements will be issued this summer, he stated. The administration plans to work with all affected entities once the regulations have been issued, encouraging them on a voluntary basis to implement and test their reporting systems before the mandate's full implementation in 2015.

From a practice business perspective, the impact of this delay on physicians will be modest, said Robert Doherty, senior vice president for governmental affairs and public policy with the American College of Physicians. Because the mandate applies only to businesses with 50 or more full-time employees, most physician practices don't fall under its purview. “There's still a very substantial part of the physician community that's in practices of 10 or fewer physicians,” Doherty said.

Although trends show that physicians are shifting toward such larger models as hospital-owned practices, it's likely that those groups already offer insurance to their employees, he said. Those practices will not need to participate in the reporting of covered individuals in 2014 unless they so choose.

Workers have a fallback

The delay also is going to have a largely negligible effect on where most patients get their health coverage, Doherty said. Large employers in all likelihood will not decide to discontinue current coverage and leave their employees uninsured as a result of the delay. What it does “is allow employers subject to the mandate another 12 months to make sure that their health plans are up to par with the federal requirements before the mandate kicks in. In the meantime, many smaller employers will be eligible for tax credit subsidies to help them afford coverage,” he said.

Still, health care observers predict that an increased number of individuals will enter the health insurance exchanges rather than wait a year for mandated employer-based coverage. The individual mandate requiring most people to obtain coverage is not affected by the delay. Those who want health insurance but work for a company that's not offering it should be able to obtain that coverage through their states' marketplaces in 2014, said Andrea Bailey Powers, counsel in the Birmingham, Ala., law office of Baker Donelson.

Mitch Morris, MD, a principal in Deloitte Consulting's Life Sciences and Health Care practice, said many employers are going to be adopting a “wait-and-see” approach in light of the delay. In the event the exchanges still are working effectively in 2015 and 2016 and a general trend evolves in which more employers send their workers to obtain their coverage there, “that will impact physician practices because you'll have fewer patients in the standard commercial pool and more in the exchanges,” he said.

Each state will have a different doctor pay environment, “but I think the expectation is that reimbursement will be lower in the exchanges,” Dr. Morris said. Solo practices or very small groups are not going to have as much negotiating power and ability to navigate the complexities of the changing marketplace, he said.

Doherty said it's too soon to tell if treating more patients on exchange plans versus employer coverage will make much of a difference to physicians. “Health plans offered through the exchanges will have to meet certain requirements relating to provider network availability that may differ from the insurance offered to their patients by employers. The payment rates and contracts may be different,” Doherty said. But until doctors see an exact menu of plans, networks and contract terms offered, “it's premature to speculate.”

Effect on uninsured rate

Some individuals who might be shut out by their employers may decide to stay uninsured and pay the penalty, either due to a lack of motivation or because they're intimidated by the prospect of enrolling in the exchanges, Powers said. The overall net result still will be an increase in the number of covered individuals in 2014, just not as large of an increase because of the 12-month delay in the employer mandate, she said.

Hospitals in particular are concerned that the delay will yield a higher uninsured rate than expected — and additional uncompensated care cases — even as ACA reductions to federal payments for charity care start taking effect in 2014.

This could be doubly hard on hospitals given that many states are opting out of the ACA's Medicaid expansion. “The goal of the ACA was to extend coverage to the uninsured, which required a shared responsibility from all stakeholders,” said Richard Umbdenstock, president and CEO of the American Hospital Assn. “We are concerned that the delay further erodes the coverage that was envisioned as part of the ACA.”

Retailers welcomed the decision to delay the employer mandate. In a statement, Neil Trautwein, vice president and employee benefits policy counsel for the National Retail Federation, called the decision a “wise move,” granting businesses more time to update their coverage provisions without being penalized unfairly.

Republican opponents of the ACA said the delay underscored the challenges associated with its implementation. “I certainly hope this action isn't a back-door attempt at getting more Americans into the exchanges, which have been plagued by problems,” said Sen. Orrin Hatch (R, Utah), the top Republican on the Senate Finance Committee. “The only reasonable recourse is to fully repeal this law.” GOP leaders immediately started pushing the White House to issue a delay of the individual insurance mandate as well.

Doherty, of the ACP, countered that the administration was showing flexibility on this issue, “just as they have shown flexibility on a lot of other issues,” such as on the Medicaid expansion and simplified application forms. “In a rational, nonpartisan, nonideologic world, this would be welcomed by people,” he said. “What we saw instead was the critics saying, 'This proves the law's unworkable,' which is not the case.”

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Most offered health coverage on the job

The Affordable Care Act starting in 2015 will require employers with 50 or more full-time employees to offer health insurance or pay penalties. Despite the effective date having been pushed back a year, most affected employers already do offer health benefits, according to the Kaiser Family Foundation. A 2012 survey determined that only 11,500 of the 230,000 companies with 50 or more employees did not offer health insurance last year. This represented only about 1.6% of the more than 89 million employees at these firms.

Firm size Offering health benefits
3-9 workers 50%
10-24 workers 73%
25-49 workers 87%
50-199 workers 94%
All small companies (3-199 workers) 61%
All large companies (200 or more workers) 98%
All companies 61%

Source: “Employer Health Benefits 2012 Annual Survey,” Kaiser Family Foundation and Health Research & Educational Trust, Sept. 11, 2012 (link)

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