Dump PPACA’s discrimination provision

By Allen Greenberg

When is a delay not a delay?

I guess when the IRS says so, though the spin-job we’re getting on the nondiscrimination provisions in Obamacare is making my head hurt.

In case you missed the news, the IRS told the New York Times a few days back that it would hold off on enforcing the provision, which is aimed at getting companies to level the playing field in terms of what sort of benefits they provide and how much they cost.

In other words, this is the provision designed to stop companies from providing better health benefits to executives. That, of course, is a common practice that allows employers to better compete for top talent.

Guidance from the IRS on the provision – and enforcement – was expected this year but is now not expected until, well, until the IRS gets the job done. At the moment, that looks like 2015. Probably. Most likely.

Benjamin Lupin, a senior VP at Mount Laurel, N.J.-based Corporate Synergies, an employee benefits brokerage, told me the IRS officials he’s heard from on the question aren’t offering much of an explanation for the delay.

“They said they hadn’t found the silver bullet yet,” Lupin said. “So they haven’t figured out how to make it work in practice.”

As the Times reported, IRS officials were, in fact, trying to figure out how best to measure the value of health benefits, how to define “highly compensated” and what exactly constitutes discrimination.

Whatever the IRS cooks up, this is, as Lupin notes, a “huge game-changer” for employers.

No doubt. Whether you believe health care is some kind of God-given right or not, it’s easy to see that the intent of this provision is to ensure people aren’t left out in the cold.

But I think this is one of those provisions that should be reconsidered and, ultimately, junked.

My reasons aren’t complicated. First, strip this provision out of the law and there’s still plenty left over to protect the uninsured or underinsured, and, second, this provision doesn’t address discrimination in health care benefits as much as it simply makes it harder on employers to be strategic in their recruitment.

Unfortunately, once this provision goes into effect, smaller and midsized employers will be more likely to send their workers to the public exchanges.

Also, larger companies with deeper pockets will be able to skirt the law by simply giving their executives bonuses on a post-tax basis. It’ll cost them more, but not as much as the discrimination penalties in the law, and it will all be perfectly legal.

The IRS is doing the right thing in putting off enforcement of this provision. I know it’s a pipe dream but the Obama administration would do us all a big favor by just dumping it.

Originally published on BenefitsPro.com