This story was updated July 3.

(Bloomberg) — The Obama administration will delay a crucial provision of its signature health care law, giving businesses an extra year to comply with a requirement that they provide their workers with insurance.

The government will postpone enforcement of the so-called employer mandate until 2015, after the congressional elections, the administration said yesterday. Under the provision, companies with 50 or more workers face a fine of as much as $3,000 per employee if they don’t offer affordable insurance.

It’s the latest setback for a health care law that has met resistance from Republicans, who have sought to make the plan a symbol of government overreach. Republican-controlled legislatures and governors in several states have refused funding to expand Medicaid coverage for the poor and declined to set up exchanges where individuals can buy insurance, leaving the job to the federal government.

The delay in the employer mandate addresses complaints from business groups to President Barack Obama’s administration about the burden of the law’s reporting requirements.


“The administration has finally recognized the obvious — employers need more time and clarification of the rules of the road before implementing the employer mandate,” says Randy Johnson, a senior vice president at the U.S. Chamber of Commerce, the nation’s largest business lobby.

Valerie Jarrett, a senior Obama adviser, said in a blog post announcing the move that the administration decided on the delay so officials could simplify reporting requirements and give employers a chance to adjust their health-care coverage.

Individual mandate

The individual mandate, a linchpin of the law that requires most Americans to carry health insurance, remains in effect.

Ron Pollack, executive director of the consumer advocacy group Families USA, says the employer-mandate delay creates “a potential for some harm” to workers. Businesses that don’t offer coverage may now wait an additional year because there is no penalty, he said. And employers who provide “substandard” coverage that doesn’t meet the minimum requirements of the health law won’t be forced to improve it, he says.

Senate Minority Leader Mitch McConnell, a Kentucky Republican, says the delay confirms his party’s argument that “Obamacare costs too much and it isn’t working the way the administration promised.”

House Speaker John Boehner, an Ohio Republican, seized on the announcement to urge the White House to also delay the individual mandate.

“I hope the administration recognizes the need to release American families from the mandates of this law as well,” Boehner says. “This is a clear acknowledgment that the law is unworkable.”

Congressional elections

The Affordable Care Act allows the Obama administration to set the starting date for the information-reporting requirement that is key to enforcing the mandate that companies cover their workers. While the White House hadn’t yet announced a date, enforcement of the mandate had been widely expected to begin in 2014, according to an official.

Congressional elections will take place in November of next year, and the delay potentially shields Democratic candidates from a backlash generated by the additional regulations on employers.

The White House had been in discussions with business groups over complaints about the reporting requirements and believes it can simplify the process, two officials said.

“As we implement this law, we have and will continue to make changes as needed,” Jarrett said in her blog post. “In our ongoing discussions with businesses we have heard that you need the time to get this right.”

Reporting burden

The employer mandate imposes extensive reporting requirements on businesses including the months during which each employee and any of their dependents was covered by health insurance, the official said. The Business Roundtable said in a June 11, 2012, comment letter that reporting requirements would demand “substantial changes in administrative procedures and reprogramming of recordkeeping systems.”

According to a White House fact sheet, more than 96% of companies with at least 50 employees already offer health insurance to their employees.


The officials said the decision stemmed from a commitment in the administration to reduce regulatory red tape and drew parallels to a move earlier this year to cut the length of application forms for insurance provided through government-sponsored exchanges to three pages from 21.

‘Wise decision’

Neil Trautwein, vice president and employee benefits counsel for the National Retail Federation, called the move “an unexpected but extraordinarily wise decision.” It could lead companies to delay their own decisions on whether to offer coverage to all their workers, Trautwein says.

“The administration is certainly encouraging employers to continue and expand offerings,” he says. “We’ll see how that goes.”

Tim Taft, president and chief executive officer of Fiesta Restaurant Group Inc., reacted to news of the delay in a phone interview: “Hooray,” he says. “That’s so huge.”

“The delay affords us what is really needed, which is time to get our heads and minds around how this is going to work,” Taft says.

200,000 employers

Former White House health policy adviser Ezekiel Emanuel, now vice provost at the University of Pennsylvania, said today on MSNBC’s Morning Joe that the delay of implementation of the employer mandate will impact a limited number of companies. “I actually don’t think this is that big a deal,” he said.

The provision only applies to employers who have 50 or more employees, Emanuel says. He estimated that there are 200,000 total employers in the U.S. impacted and that “94% already offer health insurance” to employees.

“We need to look for 2020 rather than moment to moment for changes in the system,” Emanuel said.

Obama has confronted opposition from Republicans at every turn of the law, which passed Congress with only Democratic votes and was later challenged before the U.S. Supreme Court.

Only 16 states have agreed to set up the new exchanges, or marketplaces to sell insurance to people who don’t get it at work. Twenty-four states have refused to expand Medicaid, as called for under the law, according to Kathleen Sebelius, Obama’s secretary of health and human services.

Congressional Republicans, who have vowed to try to repeal the law, have refused Obama’s requests for about $1 billion more to help enact the statute and ensure it runs smoothly. Instead, they’ve started multiple investigations into the implementation.

Nor is this the first time Obama has been forced to scale back the law’s features. In March, the administration said small businesses wouldn’t be able to give their workers a choice of health plans in exchanges set up just for them. In January, a plan to create new nonprofit insurers in states was curtailed after Congress capped funding for the companies.


Photo: Bloomberg News, from file.

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