Repeal of ACA Automatic Enrollment
Who: Any employer with more than 200 full time employees and who offers enrollment in one or more health benefit plans.
When: The Bipartisan Budget Act of 2015 was signed into law on November 2, 2015. It included the immediate repeal of the ACA mandate for automatic enrollment.
What: The Department of Labor has delayed implementation of the ACA mandated automatically enroll of new employees into a health plan. The problem has been that automatic enrollment also meant automatically set up a salary deduction for the employee’s share of self-only coverage. This mandate conflicted with previous Department of Labor (DOL) and some state laws that limited an employer’s ability to make deductions from an employee’s paycheck without their prior approval.
Executive Summary: Subject to any waiting period, the ACA mandated that employers automatically enroll new employees into one of the employer’s health benefit plans. The ACA stated that implementation would be subject to final regulations made by the DOL. However, automatic enrollment also meant an automatic deduction from an employee’s wages for their premium contribution. Under the ACA employees were to be given notice of an opportunity to opt out of any coverage to which they were automatically enrolled.
The regulations have been purposefully delayed since 2010 because of potential conflicts with previous DOL regulations protecting employees from having automatic deductions from their paychecks. In addition, several state laws prevent employers from making automatic deductions without a positive consent of the employee.
The Bipartisan Budget Act of 2015, signed into law of November 2, 2015 repealed the automatic enrollment provision of the ACA. The now repealed mandate applied only to employers of more than 200 employees who offering health plans (there is no requirement for automatic enrollment for groups of 200 or fewer employees).
Under several previous rulings, the Internal Revenue Service permitted employers to voluntarily use “default” or “negative” elections for enrollment where otherwise eligible employees are deemed to have elected a particular coverage, unless the employee returns a written waiver. This would allow employers to assure enrollment of new employees without it being a government mandate. However, some states do not allow a wage reduction without a positive election by new employees. Complicating the potential conflict between state and federal laws, is the DOL position that state laws are preempted under ERISA for self-insured plans. There is no existing court ruling to decide that matter.
Actions: Employers will need to decide how to enroll new employees following any waiting period. Plan sponsors should consult with their agent, broker, plan consultant, legal counsel, and/or Human Resources Department to determine if plan enrollment procedures and notices are in compliance with the ACA, IRS, DOL, and the newly signed law. It is also important for employers to remember that they still have to comply with other reporting aspects of the ACA.
The information presented and contained within this article was submitted by Ronald E. Bachman, President & CEO of Healthcare Visions and Chairman of the IHC Editorial Advisory Board. This information is general information only, and does not, and is not intended to constitute legal advice. You should consult legal advisors to determine the laws and regulations applicable to your company. Any opinions expressed within this document are solely the opinion of the individual author.