WASHINGTON — In a significant setback for President Obama’s signature domestic initiative, the administration on Tuesday abruptly announced a one-year delay, until 2015, in his health care law’s mandate that larger employers provide coverage for their workers or pay penalties. The decision postpones the effective date beyond next year’s midterm elections.
Employer groups welcomed the news of the concession, which followed complaints from businesses. The news was posted late in the day on the White House and Treasury websites while the president was flying home from Africa. Republicans’ gleeful reactions made it clear that they would not cease to make repeal of the law a campaign issue for the third straight election cycle.
While the postponement technically does not affect other central provisions of the law — in particular those establishing health insurance marketplaces in the states, known as exchanges, where uninsured Americans can shop for policies — it throws into disarray the administration’s effort to put those provisions into effect by Jan. 1.
“I am utterly astounded,” said Sara Rosenbaum, a professor of health law and policy at George Washington University and an advocate of the law. “It boggles the mind. This step could significantly reduce the number of uninsured people who will gain coverage in 2014.”
Under the law, most Americans will be required to have insurance in January 2014, or they will be subject to tax penalties. The announcement Tuesday did not say anything about delaying that requirement or those penalties.
Administration officials sought to put the action in a positive light in the online announcements, and they emphasized that the existing insurance coverage of most Americans would not be affected.
“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mark J. Mazur, an assistant Treasury secretary, wrote on the department’s website. “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.”
The 2010 Affordable Care Act required employers with more than 50 full-time workers to offer them affordable health insurance starting next year or face fines. Some companies with payrolls just above that threshold said they would cut jobs or switch some full-time workers to part-time employment so that they could avoid providing coverage.
Under the provisions to set up state-based marketplaces for coverage for uninsured Americans, subsidies are supposed to be available for lower- and middle-income people who qualify and are not insured through their employers.
By delaying the mandate for businesses and its reporting requirements, the government may be unable to confirm before 2015 whether employers are offering insurance to their employees, making it difficult for the exchanges to know who is entitled to subsidies to help pay for policies.
“I do not see how people can receive premium subsidies if there are no reporting requirements for employers,” said Rosenbaum, the health policy scholar. “The subsidies are bound up with evidence of what an employer does or does not offer.”
Enrollment in the exchanges is to begin Oct. 1, with insurance coverage taking effect Jan. 1. “We are on target to open the health insurance marketplace on Oct. 1 where small businesses and ordinary Americans will be able to go to one place to learn about their coverage options and make side-by-side comparisons of each plan’s price and benefits before they make their decision,” Valerie Jarrett, Obama’s senior adviser and liaison to the business community, wrote on the White House website.
Yet even some supporters of the law dispute that the establishment of the health insurance exchanges is on schedule, especially since progress varies by state and some Republican-led states are resisting the law and withholding resources for putting it into effect.
Much of the administration’s public effort, especially at the Department of Health and Human Services, has been directed toward spreading the word to uninsured Americans, especially younger and healthy people whose participation is needed to help keep down premiums for everyone else. About 85 percent of Americans are insured, so most individuals will be unaffected, at least initially.
Behind the scenes, however, the administration has been fielding questions and criticisms from businesses about the reporting requirements — especially the Treasury Department, which has responsibility, given its oversight of the tax reporting system.
Employer groups were quick to applaud the delay. At the US Chamber of Commerce, which has strongly opposed the law, Randy Johnson, senior vice president of labor, immigration, and employee benefits, said in a statement, “The administration has finally recognized the obvious — employers need more time and clarification of the rules of the road before implementing the employer mandate.”
Mazur, the Treasury official, said the delay “will allow us to consider ways to simplify the new reporting requirements consistent with the law.”