Obama Administration Delays Health Care Law Employer Penalty Until 2015

Republican former CBO director calls decision "deviously brilliant"

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President Barack Obama speaks about the Affordable Care Act at the Fairmont Hotel in San Jose, Calif., on June 6, 2013

The Obama Administration announced on Tuesday that it is delaying implementing a key component of the Affordable Care Act for a year following complaints from the private sector about reporting requirements.

The so-called employer mandate, which penalizes employers with more than 50 employees if they fail to provide a minimum standard of affordable health insurance, was set to kick in in 2014, but now will take effect in 2015, the Treasury Department announced in a blog post first reported by Bloomberg News. The delay not only allows the Administration time to alleviate concerns among business owners, but also takes a controversial component of the law off the table before the midterm elections.

The vast majority of employers that already provide coverage to their employees raised concerns about burdensome reporting requirements under the law, a complaint the Administration is particularly sensitive to. Companies that don’t meet the law’s requirements now have an extra year to alter their policies.

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“We have been in a dialogue with businesses and we think we can simplify the new reporting — we want to give businesses who want to provide health insurance the time to get this right,” a senior Administration official said, explaining the delay. “Just like our effort to turn the 21-page application for health insurance into a three-page application, we are working hard to adapt and to be flexible in employer and insurer reporting as we implement the law.”

The delay deprives the federal government of a year of penalties that would have been paid by companies that do not meet the law’s requirements, with as yet unknown budgetary effects. Republicans had warned of a downturn in hiring as a result of the mandate.

The so-called individual mandate is unaffected by the rule change. That provision requires the vast majority of Americans to purchase insurance or pay a penalty, with tax credits provided to those who can’t afford coverage.

Republican former Congressional Budget Office director Douglas Holtz-Eakin called the move “deviously brilliant,” by removing a potential electoral impediment from in front of congressional Democrats before the midterms.

“Democrats no longer face the immediate specter of running against the fallout from a heavy regulatory imposition on employers across the land,” Holtz-Eakin wrote. “Explaining away the mandate was going to be a big political lift; having the White House airbrush it from the landscape is way better.”

The Administration will publish formal guidance on the rule change within the next week.

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