The Obama administration unexpectedly announced Tuesday it is delaying the employer mandate under the Patient Protection and Affordable Care Act until 2015.
The mandate — which requires mid-sized and large employers to offer health insurance coverage to their workers — was one of the main requirements of the health care overhaul that was set to go into effect Jan. 1, 2014.
But the Treasury Department announced Tuesday that it would delay its enforcement an entire year after hearing numerous concerns from employers about the challenges of its implementation.
“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mark J. Mazur, assistant secretary for tax policy, wrote in a blog post.
“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. We have listened to your feedback. And we are taking action.”
The one-year delay, he wrote, “will allow us to consider ways to simplify the new reporting requirements consistent with the law."
Within the next week, Mazur said, the Treasury department will issue official guidance to insurers, self-insuring employers and other parties that provide health coverage. Formal rules will be proposed later this summer, he said.
PPACA requires employers with more than 50 full-time workers to provide health insurance or pay steep fines. Various studies and employer polls found that numerous companies would downsize their companies or cut hours for its employees to dodge the mandate.
The delay isn't the first interruption for PPACA. Earlier this year, the administration delayed by one year its Small Business Health Options Program, a move that many small business owners called a "major letdown" for their employees looking for a competitive marketplace for health insurance options.
Republicans have been calling PPACA's implementation a "train wreck," arguing that the law will not be implemented on time.
A report out just last month from the Government Accountability Office also pointed to challenges in opening the federal exchanges on time, underscoring the challenges the administration has in the coming months.
The new employer mandate delay was enough ammo for critics of the law to continue their attacks. Senate Minority Leader Mitch McConnell said that the delay confirms that "Obamacare costs too much and it isn’t working the way the administration promised.”
Business groups welcomed the news. "A pleasant surprise," said Randy Johnson, senior vice president of the U.S. Chamber of Commerce. There was no advance warning of the administration's action, he said.
The National Retail Foundation called the delay a "wise move."
“This one-year delay will provide employers and businesses more time to update their health care coverage without threat of arbitrary punishment," NRF vice president and employee benefits counsel Neil Trautwein said.
Tuesday's news leaves unchanged other provisions of the law, including the establishment of health care exchanges where individuals without coverage can shop from a menu of insurance policies. Enrollment in the exchanges is to begin on Oct. 1, and they are to take effect on Jan. 1.
In a White House blog post, President Obama senior adviser Valerie Jarrett said the administration is "on target" to open the exchanges Oct. 1.
"As we implement this law, we have and will continue to make changes as needed," Jarrett said. "In our ongoing discussions with businesses we have heard that you need the time to get this right. We are listening."
Here is the Mazur's blog in its entirety:
"Over the past several months, the Administration has been engaging in a dialogue with businesses - many of which already provide health coverage for their workers - about the new employer and insurer reporting requirements under the Affordable Care Act (ACA). We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively. 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. We have listened to your feedback. And we are taking action.
"The Administration is announcing that it will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin. This is designed to meet two goals. First, it will allow us to consider ways to simplify the new reporting requirements consistent with the law. 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. Within the next week, we will publish formal guidance describing this transition. Just like the Administration’s effort to turn the initial 21-page application for health insurance into a three-page application, we are working hard to adapt and to be flexible about reporting requirements as we implement the law.
"Here is some additional detail. The ACA includes information reporting (under section 6055) by insurers, self-insuring employers, and other parties that provide health coverage. It also requires information reporting (under section 6056) by certain employers with respect to the health coverage offered to their full-time employees. We expect to publish proposed rules implementing these provisions this summer, after a dialogue with stakeholders - including those responsible employers that already provide their full-time work force with coverage far exceeding the minimum employer shared responsibility requirements - in an effort to minimize the reporting, consistent with effective implementation of the law.
"Once these rules have been issued, the Administration will work with employers, insurers, and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015. Real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.
"We recognize that this transition relief will make it impractical to determine which employers owe shared responsibility payments (under section 4980H) for 2014. Accordingly, we are extending this transition relief to the employer shared responsibility payments. These payments will not apply for 2014. Any employer shared responsibility payments will not apply until 2015.
"During this 2014 transition period, we strongly encourage employers to maintain or expand health coverage. Also, our actions today do not affect employees’ access to the premium tax credits available under the ACA (nor any other provision of the ACA)."