Affordable Care Act Employer Mandate to Offer Affordable Health Plans Delayed

In an update to the Treasury Department website yesterday, a senior administration official announced a year-long delay in the “employer mandate” provision of the Affordable Care Act. The mandate will now go into effect in January of 2015.

Under this provision, employers that don’t offer health care coverage to their full-time employees would be subject to fines of $2,000 per employee, minus the first 30 employees. If employers offer coverage that is deemed unaffordable or doesn’t offer comprehensive coverage, their employees would be able to buy coverage on the new state-based insurance exchanges starting in 2014. If any of the employees are eligible for subsidies from the federal government to purchase insurance in the exchanges, then the employer would be liable for a $3,000 fine for each employee that receives subsidized coverage.

Enforcing this mandate required the Internal Revenue Service to set up rules and a reporting system for employers and insurers to submit the cost and details of the coverage they offer. The administration cites concerns around these reporting requirements as the reason for the delay. Final, simplified rules on how business will report data will be issued this summer and voluntary reporting will be encouraged through 2014. This will give businesses time to comply with the law and the government time to test for problems before full implementation in 2015.

It is unclear what effect this will have on benefits for workers.

According to the Kaiser Family Foundation, 94% of firms with 50-199 employees and 98% of firms with more than 200 employees already offer some type of health benefit without any kind of mandate in place. In an article for Health Affairs, law professor Timothy Joost says “all of the reasons employers now have for offering coverage to their employees — significant tax subsidies, recruitment and retention of employees, and increased productivity and decreased absenteeism when employees are healthy — will continue to exist without the mandate penalty.”

On the other hand, economist Jared Bernstein at the New York Times notes that, without a mandate, employers may take the opportunity to drop coverage and force employees onto the new state-exchanges where subsidies will be offered. This would shift the cost of providing health care coverage from the employer to the taxpayers.

In a statement, the AFL-CIO expressed concern that, without the mandate, employers won’t have an “incentive to offer or continue offering affordable, comprehensive health care coverage to some of their employees.”

The Treasury Department has promised to issue regulations in the next week to clarify what this delay means workers and other parts of the law. We will provide updates as more information is released.

Overview of Employer Mandate available here: A guide to the employer mandate

New York Times Article on Delay: Crucial Rule Is Delayed a Year for Obama’s Health Law