A Victory Over ACA's Auto-Enrollment Mandate
Just in time for Halloween, Congress and President Barack Obama reached a budget agreement that some experts, such as the Urban Institute's Richard Johnson, are calling "an unexpected bit of sanity coming out of Washington," according to a report by CNBC.
I'm not sure how "sane" it is to continue kicking the we're-just-going-to-let-someone-else-deal-with-the-looming-debt-crisis can down the road, but one of the budget deal's negotiated provisions dealing with Obamacare has many large employers breathing a sigh of relief. After much negotiating, an onerous requirement has been permanently eliminated: the one that would have forced all employers with 200 or more full-time employees to automatically enroll new full-time hires in a health-insurance plan and automatically re-enroll employees.
The requirement for large employers was added to the Fair Labor Standards Act when the Affordable Care Act was passed in March 2010. The provision was set to go into effect in 2017, although the Department of Labor had delayed the effective date of the requirement until it could release regulations, which never occurred.
Under the automatic-enrollment provision, employees would have been given an opportunity to voluntarily choose a health-insurance plan or decline having a plan. Large employers would have had to create large, complex reporting systems for their employees to ensure they weren't automatically enrolling in a plan someone who didn't want one.
The requirement to automatically enroll employees would not have cost employers any additional direct costs related to providing health insurance, but it would have been incredibly difficult and costly to implement from a human resources perspective. According to the Health Affairs blog, the Congressional Budget Office reports that ending auto-enrollment for large businesses will "reduce the budget deficit by $7.9 billion over the 2016–2025 period because employees would receive more taxable income rather than health benefits, which are not taxable, and because of increased individual responsibility penalty payments."
Writing in The National Law Review, Damian A. Myers, an associate in the Employee Benefits, Executive Compensation, and ERISA Litigation Practice Center, says the lack of details regarding the auto-enrollment mandate created a number of questions that were never fully answered.
"Given the nature of most employer health benefit programs, the statute left open a large number of questions," wrote Myers. "For instance, who constitutes a full-time employee for this purpose? Would dependents also need to be enrolled? Which benefit option must an employee be enrolled in? Is a refund necessary for an employee who opts-out?"
Numerous business associations applauded the decision to remove this costly and unnecessary provision that was slipped into ACA without much media attention more than five years ago. The Retail Industry Leaders Association, National Restaurant Association, Food Marketing Institute, Associated General Contractors, American Hotel & Lodging Association, National Association of Health Underwriters, and National Retail Federation all praised the removal of the auto-enrollment requirement.
"Without this change, the auto-enrollment requirement would have had a damaging impact on both restaurant owners and their employees — creating additional administrative burdens for employers," said Angelo Amador, senior vice president and regulatory counsel at the National Restaurant Association, in a press release. "This fix helps alleviate the potential financial burden placed on employees who inadvertently miss opt-out deadlines and free restaurant owners from additional unnecessary paperwork."
Most of the Obamacare-related budget negotiations focused on eliminating the so-called "Cadillac tax," a new 40 percent excise tax on health insurance plans that exceed $10,200 annually for one person or $27,500 annually for family coverage. The Cadillac tax is set to take effect in 2018 and has been a major source of contention between congressional Republicans and Democrats.
Republicans, echoing the concerns of many businesses, say the tax will likely lead to higher premiums for employees and will punish employers for offering higher-quality health insurance plans.
One of the major problems related to the Cadillac tax that has already emerged is the so-called "spousal surcharge," an extra cost added to health insurance plans provided for employee spouses. Many companies are adding $100 or more per month to premiums in the hope spouses will seek coverage elsewhere.
Republicans failed to negotiate a deal that would eliminate the Cadillac tax, which many Democrats say will be an important source of revenue in future years, but defeating the auto-enrollment requirement is still a significant win for countless businesses and their employees. By forever removing this onerous provision, many businesses will be able to save millions in future regulatory and human-resources costs, which means more money will be available to invest in employees, research, business expansion, advertising, and product development.
Justin Haskins is editor of the Heartland Institute's Consumer Power Report.