Obama Administration to Delay Enforcement of Employer Mandate in Health Care Law in 2014

Obama Administration to Delay Enforcement of Employer Mandate in Health Care Law in 2014

A top Treasury Department official said Tuesday night that his agency is delaying for one year enforcement of a requirement in the health care law that employers with 50 or more workers pay penalties when not following the law’s requirements.

Administration officials said they were responding to the concerns of businesses that said they needed more time to get compliance with the law right, and administration allies downplayed the significance of the move, which had been requested by the U.S. Chamber of Commerce earlier this year. But Republicans immediately pounced on the postponement of the requirement as a sign that the law is unworkable and must be repealed.

A representative of a major retailers’ group also said that the delay was a reflection of problems faced by the administration in developing the technical systems needed so that employers could report the worker insurance coverage they were providing.

Under the law (PL 111-148, PL 111-152), employers with 50 or more employees were to pay fines when they don’t provide health insurance coverage and their workers must go to the health insurance exchanges to obtain coverage, beginning in 2014.

The Treasury official, Mark Mazur, assistant secretary for tax policy, said in a blog post that the step is being taken as part of “transition relief” to free employers from having to comply with health law reporting requirements on the type of health benefits they provide.

Mazur said in a blog notice that “we recognize that this transition relief will make it impractical to determine which employers owe shared responsibility payments,” the term for employer penalties used by Obama administration officials.

The added year “will allow us to consider ways to simplify the new reporting requirements,” he said. “Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees,” Mazur said.

Mazur said the “vast majority” of the employers affected already provide health insurance coverage.

Although coverage expansion under the health law overwhelmingly comes from expanding Medicaid and giving uninsured Americans subsidies to buy coverage if their employer does not provide affordable insurance, the postponement means fewer of those without health benefits will receive them.

The announcement does not affect enrollment in the exchanges, which is set to begin on Oct. 1. The exchanges are the marketplaces in which workers who need individual insurance policies and small businesses will obtain health insurance coverage.

Ron Pollack, executive director of Families USA, a strong supporter of the law, downplayed the impact on coverage expansion. “I don’t think it’s going to have any significant impact,” he said, adding that employers will be “happy and relieved” to have another year to get ready to provide required information on the health benefits they provide.

However, the penalty payments are clearly significant, based on Congressional Budget Office projections. CBO’s May 2013 estimate of the impact of the penalties said they would reduce deficit spending by $140 billion in 2014-2023.

The delay also lets businesses that complained the loudest about the impact of the coverage requirements — fast food restaurants, retail chains and construction companies — off the hook for a year. “It really affects a wide swath of the economy,” said Neil Trautwein of the National Retail Federation, including retail concerns both large and small.

“Working America is not going to have the burden of carrying this through,” said Trautwein, adding that “it’s a very wise and pragmatic decision” by the Obama administration that means it will take heat from its allies on the left.

But he also said that the decision was based on technical problems facing the administration in making the reporting system work. The decision reflects “a recognition that neither we or the administration or the exchanges were going to get there on time to make things work by 2014,” Trautwein said.

Trautwein explained that the requirements employers face for reporting the details of coverage they provide involve adopting uniform data formats easing transmission among businesses, insurance exchanges and the Internal Revenue Service. That communication infrastructure hasn’t developed to the point where exchanges could have notified employers of penalties they would have to pay when their workers went to exchanges for coverage, Trautwein said.

Trautwein had no estimate of how many fewer workers would be covered next year as a result of the decision. But to the extent workers don’t get benefits from employers and qualify for federally funded subsidies based on income, they’ll still have an opportunity to obtain health insurance coverage next year, potentially raising spending on those subsidies. “They’ll err in terms of providing more credits,” Trautwein said of the administration.

In March, the U.S. Chamber of Commerce submitted comments urging the Treasury Department and the Internal Revenue Service not to enforce the penalties for employers for the first year after they were slated to take effect. The chamber called the coverage requirement for employers “complicated” and said that businesses “have far too little time to fully understand their obligations” because of the amount of time it took for the administration to release guidance.

“Therefore, we urge the Treasury and IRS to adopt a non-enforcement approach during the calendar year of 2014 for employers that make good faith efforts to comply with the employer mandate but fail to do so,” wrote Randel K. Johnson, senior vice president of labor, immigration and employee benefits, and Katie Mahoney, executive director of health policy.

Valerie Jarrett, a senior adviser to President Barack Obama, said in a White House blog post that “we’re listening to businesses about the health care law.” She said the administration wants to cut red tape and simplify the reporting process, and also give businesses more time to comply. “From the start, this Administration has encouraged an ongoing dialogue with the leaders of our nation’s businesses, large and small,” she said. “As we implement this law, we have and will continue to make changes as needed.”

And Terry Gardiner of the Small Business Majority said that most small businesses would not be affected by the decision because 96 percent of them have less than 50 workers. “The one-year delay in reporting requirements will allow larger businesses time to adjust and provide additional input to the Treasury on how the proposed requirements will work best,” said Gardiner.

But Republican lawmakers issued strongly worded statements using the announcement to once again make their case for repealing the health care overhaul.

Sen. Orrin G. Hatch, the top Republican on the Senate Finance Committee, questioned the administration’s motives and maintained that “the only reasonable recourse is to fully repeal this law.”

“That the Obama Administration is putting off this job-killing requirement on employers, but not individuals and families, shows how deeply flawed the President’s signature domestic policy achievement is,” said the Utah Republican. “While a delay of this mandate is welcome news since it shows the challenges the employers are facing complying with it, a delay — conveniently past the 2014 election — only adds to the uncertainty these job creators face because of Obamacare.”

House Speaker John A. Boehner said the announcement “means even the Obama administration knows the ‘train wreck’ will only get worse.”

“I hope the administration recognizes the need to release American families from the mandates of this law as well,” said Boehner, R-Ohio. “This is a clear acknowledgment that the law is unworkable, and it underscores the need to repeal the law and replace it with effective, patient-centered reforms.”

House Energy and Commerce Oversight Subcommittee Chairman Tim Murphy noted that his panel’s work “has revealed countless flaws and fumbles.”

“The bottom line is that this budget-busting law is not ready for primetime and I’m relieved to learn that the Administration is no longer pretending that all is well,” said the Pennsylvanian.

But House Majority Whip Kevin McCarthy of California said that the decision “is insulting to America’s job creators in that the President believes that a one year delay can solve the long-term problems that Obamacare will have on our already struggling economy.”

House Majority Leader Eric Cantor of Virginia said that “the best delay for Obamacare is a permanent one.”

“This further confirms that even the proponents of Obamacare know it will hurt jobs, decrease economic growth and make it harder for families to have access to quality and affordable health care,” Cantor said.

And Rep. Charles Boustany Jr., R-La., the sponsor of a House bill (HR 903) to repeal the employer mandate, said the move “shows exactly why I have opposed this law and fought to prevent this mandate from going into effect.”

Sen. John Barrasso of Wyoming called the move “a clear admission by the Administration that the health care law is unaffordable, unworkable and unpopular.” He pressed to repeal and replace the overhaul and, like Hatch, maintained that politics are in play.

“It’s also a cynical political ploy to delay the coming train wreck associated with Obamacare until after the 2014 elections,” he said.

Outside of Congress, the American Benefits Council applauded the delay in a statement, noting that the group has been closely engaged with the administration “to mitigate wherever possible the cost and burdens of implementing” the law and will continue to do so.

“This provides vital breathing room to implement the law in a more thoughtful and administrable way,” said President James A. Klein. “Major employers have led the way in providing coverage to their workers and are expending great resources to ensure compliance with the new law. This relief will minimize disruption for employers and their workers.”

Restaurant industry officials also said they were relieved. “We view today’s announcement as recognition that the Administration has listened to the National Restaurant Association about the concerns of our members, the complexity of the requirements, and the need for additional time to be able to comply effectively,” said Dawn Sweeney, President and CEO of the National Restaurant Association.

The National Federation of Independent Business said that it was the latest evidence the law is unworkable. “We need a permanent fix to this provision to provide long term relief for small employers,” said Amanda Austin, director of federal public policy.

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