INTRO: If they haven't done so yet, now is the time for employers to make a decision about “pay or play” compliance with the Patient Protection and Affordable Care Act. Alden J. Bianchi, a practice leader at Boston-based Mintz Levin Cohn Ferris Glovsky and Popeo P.C., discusses the rules and recent Internal Revenue Service guidance.

With the passage of the Patient Protection and Affordable Care Act in March 2010, word quickly spread throughout the employer community about the need to contend with new “play-or-pay” rules beginning in 2014. Under these rules, employers will need to offer group health plan coverage to all their full-time employees or face the prospect of a stiff fine.

But initially, the collective response by many employers and their trade associations was denial. “No need to worry, the Supreme Court will overturn it. It can't really be constitutional, can it?” some employers thought.

In June 2012, when the court did not overturn the law, many employers still thought there was nothing to worry about.

“Gov. Romney would repeal the law on the first day in office, and he's obviously going to win, isn't he?” many employers believed. “And in any case, 2014 is a long way off. There is plenty of time for Congress to change its mind.”

Well, it was found to be constitutional, Mitt Romney didn't win the 2012 presidential election, Congress didn't change its mind, and 2014 is right around the corner. In short, it's time for employers to no longer do nothing about “play-or-pay” compliance.

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While the PPACA has many provisions affecting employers, the play-or-pay rules — or, more technically, the law's “employer shared responsibility” rules — have by far the biggest financial impact for employers. In most cases, the costs will be material. But what has only slowly dawned on employers is that, by understanding the rules and taking the time to assess their impact using various plan designs, the amount of the costs can be managed to a degree that would surprise most.

Shortly after the act's passage, there was speculation that employers would drop or decline to provide health insurance coverage because the cost of the sanction or penalty is far less than the cost of health insurance. Surveys from the respected think tanks and global consulting firms reached differing conclusions.

But all were suspect, because the questions were being asked in the absence of implementing regulations from which to determine cost. In many instances, these surveys likely solicited nothing more than the respondents' attitudes toward the act, for which compliance served as a mere proxy. While interesting political theater, these surveys did little or nothing to help employers assess or manage the financial impact of the law.

The Internal Revenue Service has issued comprehensive proposed rules, and employers and their advisers have had some time to think about how the rules will work and what they mean for different industries and sectors. In place of the early, knee-jerk, partisan reactions, there is emerging a more sober consensus under which sophisticated employers, with the assistance of their advisers, are modeling different compliance alternatives in an effort to arrive at what is best for them and their workers.

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The recently proposed regulations are, for the most part, employer-friendly. This is not to say that compliance will be easy. These rules are too complex for that. But the regulators have managed to smooth over some of the rougher edges. Some the highlights include:

• For groups of employers under common control, penalties are determined and assessed controlled group member by controlled group member.

• For purposes of determining whether an employer makes an offer of group health plan coverage, at least 95% (and not 100%) of an employer's full-time employees must be offered coverage.

• The proposed rules contain generous, workable rules for determining which employees are full-time in the case of variable, contingent and seasonal employees.

• Affordability determinations are based on the cost of “self-only” coverage.”

• While employers must offer dependent coverage in order to be deemed to make an offer of coverage, they need not offer coverage to spouses.

• Transitional relief is provided for fiscal year plans and for other key purposes.

These clarifications go a long way toward permitting employers to get a sense of their costs in 2014 and beyond, and how these costs can be managed and contained. But this requires attention, starting with understanding the rules and what is at stake, and followed by action. Specifically, employers need to grasp what will happen if they make no change, and how costs will change based on available options.

For employers who have yet to act, there is little time to move through the remaining stages of grief and loss (i.e., anger, bargaining and depression) to arrive at acceptance, even if only grudgingly.

Alden J. Bianchi is the Boston-based leader of Mintz Levin Cohn Ferris Glovsky and Popeo P.C.'s employee benefits and executive compensation practice. He can be reached at ajbianchi@mintz.com or at 617-348-3057.