Affordable Care Act Automatic Enrollment Mandate Repealed by Bipartisan Budget Act
On Monday, November 2nd, the President signed the Bipartisan Budget Act of 2015 (BBA). Some legislators had hoped that a budget deal would at least include a repeal of the controversial 40% excise tax on high-cost health care (the so-called “Cadillac Tax”). However, the BBA left the Affordable Care Act (ACA) largely intact, with the ACA’s automatic enrollment mandate being the only casualty.
The ACA added Section 18A to the Fair Labor Standards Act requiring employers with 200 or more full-time employees to automatically enroll new full-time employees in a health benefit plan and to automatically continue coverage during open enrollment. The statute also required that any full-time employee who was automatically enrolled be given notice and an opportunity to opt-out of the coverage. Ostensibly, the automatic enrollment requirement was included in the ACA as a way to encourage health coverage (similar to design features allowing automatic enrollment in defined contribution retirement plans).
Given the nature of most employer health benefit programs, the statute left open a large number of questions. 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? Recognizing the need for implementing regulations, the Department of Labor issued guidance delaying the effective date of the automatic enrollment mandate until regulations were released. No such regulations were ever proposed.
Critics of the automatic enrollment mandate largely viewed it as unnecessary. The ACA’s employer shared responsibility mandate already requires that employers with more than 50 full-time employees (including full-time equivalent employees offer adequate coverage to 95% (70% in 2015) of their full-time workforce. Also, many of employer health programs already provide for automatic continuance of health coverage during open enrollment (absent, of course, an affirmative election otherwise). Finally, with the individual mandate requiring enrollment in health coverage to avoid a tax penalty, individuals already have an incentive to enroll in health coverage. Therefore, the policy justifications (i.e., encouraging enrollment) present in the retirement plan context simply did not apply to health care.