Obama delays ACA employer mandate until 2015
This article was originally published in Scrip
Republicans wasted no time in pouncing on the Obama administration's surprise revelation on 2 July that it was delaying by one year the Affordable Care Act's mandatory employer and insurer reporting requirements – but not the individual mandate requirements – with one lawmaker declaring the action proof the law was an "historic mistake."
"This is Obamacare unraveling," charged Senator Lamar Alexander (Republican-Tennessee), ranking member on the Senate Health, Education, Labor and Pensions Committee, who insisted the delay is the "train wreck" Senator Max Baucus (Democrat-Montana), who helped write the health care reform law, had predicted was coming (scripintellingence.com, 1 May 2013, 25 March 2013).
"The administration’s sudden turnabout is a clear admission that its signature law is bad for business and bad for jobs," added Representative Fred Upton (Republican-Michigan), chairman of the House Energy & Commerce Committee, which has oversight over the Department of Health and Human Services. "This law will never be ready for prime time and sadly, the administration's acknowledgement that it still needs yet another year clearly disrupts everyone's ability to determine what is best for them and their business."
The administration made the disclosure through separate blogs on the Treasury and White House websites late on 2 July that businesses with more than 50 employees will not be penalized if they do not make affordable health coverage available to their workers by 1 January – putting that off until 2015.
The penalties, which the Obama administration calls "employer shared responsibility payments," are from $2,000 to $3,000 annually times the number of full-time employees, minus 30 employees. The penalty is increased each year by the growth in insurance premiums.
Remaining in effect with no delay, however, are the individual penalties under the ACA, which requires US taxpayers making at least $18,000 annually to maintain minimum essential insurance coverage for themselves and their dependents by 2014 or pay a penalty of 1% of their family income or $95 per family member, whichever is greater, with that figure rising to 2% of income or $325 per family member in 2015, topping out at 2.5% of income or $695 per family member in subsequent years.
The act provides that the penalty will be paid to the Internal Revenue Service (IRS) with an individual's taxes, and shall be assessed and collected in the same manner as tax penalties.
But Valerie Jarrett, senior advisor and assistant to the president for intergovernmental affairs and public engagement at the White House, said the administration determined that it needed to give employers more time to comply with the law, which she said would allow companies to test the new reporting systems and make any necessary adaptations to their health benefits, "while staying the course toward making health coverage more affordable and accessible for their workers."
Mark Mazur, assistant secretary for tax policy at the Treasury Department, said the additional year also would allow the administration to consider ways to simplify the ACA's reporting requirements.
"We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively," Mr Mazur wrote in the Treasury's 2 July blog. "We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so."
He said the Obama administration anticipates publishing this summer the long-awaited proposed rules for the employer mandate.
While companies are being given another year, the administration is still hoping firms will use that time to do some "real-world testing" of reporting systems, which Mr Mazur said would "contribute to a smoother transition to full implementation in 2015."
"This one-year delay will provide employers and businesses more time to update their health care coverage without threat of arbitrary punishment," said Neil Trautwein, vice president and employee benefits policy counsel at the National Retail Federation.
Jackson Hewitt Tax Service said the Obama administration's one-year delay "addresses anxiety among employers about the lack of final regulations from the IRS."
The outcome of the delay in the ACA employer mandate may mean fewer companies cutting employee hours to below 30 hours per week so they could classify workers as part-time to get around the law's penalties, the tax firm said.
The postponement also may cause employers to postpone any offer of coverage to dependents, which Jackson Hewitt said was a good thing for families because children without an offer of employer-sponsored coverage may be eligible for the taxpayer-funded Children's Health Insurance Program (CHIP) if they meet the state-specific income and other eligibility requirements.
In addition, children without an offer of employer coverage may be eligible for the new premium assistance tax credits in 2014, even if their incomes are above the state-specific CHIP limit, the income tax preparation firm said.
Employers may actually be more likely to cooperate with enrollment efforts to get uninsured employees and their uninsured dependents covered under various ACA programs because they know with certainty that they will not face a penalty in 2014, the Parsippany, New Jersey-based tax company said.
States also may face less pressure from business interests to expand Medicaid because of the administration's delay in the employer mandate, Jackson Hewitt added.
But Amanda Austin, director of federal public policy at the National Federation of Independent Business, which, along with Florida and 25 other states, unsuccessfully sought to get the ACA declared unconstitutional, said the Obama administration delay was "simply the latest evidence that implementation of this terrible law is going to be difficult if not impossible, and the burden is going to fall on the people who create American jobs (scripintelligence.com, 28 June 2012, 29 June 2012).
Conservative economist Douglas Holtz-Eakin, who served on President George W Bush's Council of Economic Advisers and was the director of the Congressional Budget Office from 2003-2005, called the ACA delay "deviously brilliant" – insisting the administration created a "de facto advertising campaign of enormous scale and reach" because companies eager to "drop" their employees coverage and "dump" them into the ACA exchanges will end up promoting the online marketplaces as a positive thing for their workers.
"Viewed from a health insurance perspective, the implications are mixed," Mr Holtz-Eakin said in a 2 July blog posting on the website of the American Action Forum, a conservative policy group. "For some, it may well be the case that the new, exchange-based insurance is a better combination of coverage and cost. But it will come at the cost of even greater churning in insurance coverage – which translates into switching provider networks and interrupting health care."
Mr Holtz-Eakin said that under the delay, the Democrats also will no longer face the "immediate specter of running against the fallout from a heavy regulatory imposition on employers across the land.”