“The Obama administration delayed a key provision of the president’s healthcare reform law by a year, saying today it will not require employers to provide health insurance for their workers until 2015.
The delay, which could raise new questions about whether Obamacare will be implemented on time, comes in response to widespread complaints from businesses and their lobbyists about reporting requirements for employers with 50 or more full-time workers.
Companies would have had to pay the Internal Revenue Service $2,000 for each full-time employee who did not get health coverage, beginning Jan. 1, when the Patient Protection and Affordable Care Act was scheduled to come into full effect.
“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 post that was published on the department’s website late Tuesday.
“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,” Mazur wrote.
Mazur stressed that other key parts of the law remain on track to be implemented in 2014, including new tax credits to help individuals buy health insurance if their employer do not provide such benefits.
He said the administration will publish formal guidance describing the changes within the next week.
Trade groups representing retailers and restaurants, among those expected to be hit hardest by the mandate, welcomed the one-year extension.
“We commend the Administration’s wise move,” said National Retail Federation Vice President Neil Trautwein. “This one-year delay will provide employers and businesses more time to update their healthcare coverage without threat of arbitrary punishment.”
Republicans called it evidence that Obama’s plan was a failure, while Democrats termed it a demonstration of flexibility. Whether that flexibility opens the door to further changes in the healthcare law is now a matter of debate.
“If this is negotiable, it seems like anything is negotiable,” said Malcolm Slee, a tax lawyer who is working with businesses on healthcare implementation.
House of Representatives Speaker John Boehner said the administration should now provide relief individuals who face a penalty if they do not obtain health coverage by 2014. The so-called individual mandate will begin next year at $95, or 1 percent of taxable household income and rise in phases to $695 per person, with a cap of 2.5 percent of household income, by 2016.
“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,” Boehner said in a statement.
Senator Orrin Hatch, the top Republican on the Senate Finance Committee, agreed.
“A delay — conveniently past the 2014 election — only adds to the uncertainty these job creators face because of Obamacare,” Hatch said. “The only reasonable recourse is to fully repeal this law.”
But Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid, said the change would help make Obamacare as beneficial as possible by allowing the administration to work with business stakeholders.
“It is better to do this right than fast,” he said.
The administration has already delayed insurance offerings for small businesses that were to be made available through new online exchanges. A recent report by the watchdog Government Accountability Office also called into question whether new insurance marketplaces for millions of individuals would meet an October 1 deadline for open enrollment.
The administration has given no indication that it plans to delay the penalty on Americans who do not get coverage either from employers or on their own. That fine is scheduled to start at $95 next year.
The so-called employer mandate is not as central to the law as other provisions. Coverage rates are already high among large and medium-sized businesses. Among employers with more than 200 employees, 98% offer health benefits, according to an annual survey by the nonprofit Kaiser Family Foundation and the Health Research & Educational Trust, and 94% of those with between 50 and 199 employees provide insurance.
Small businesses are less likely to offer health benefits, but they are exempt from the health law’s mandate.
The mandate nonetheless has been a lightening rod for criticism in the business community, particularly for employers that rely on part-time workers.
A survey of about 900 employers last month found that almost a quarter of the firms were still unsure how to track the hours of employees who work variable schedules.
The way employees are classified also prompted warnings from many businesses and even some supporters of the law that many employers would shift employees to part-time work to avoid the penalty.
The employer mandate, which was based on a system enacted in Massachusetts in 2006, has generated relatively little controversy there. Employer health coverage in the state increased.
Valerie Jarrett, a senior advisor to Obama, said in a blog post on Monday that the government was fully prepared to open the new insurance exchanges for individuals in October.
Tuesday’s delay also raised questions about initial funding for Obamacare. The employer mandate is expected to raise $140 billion in revenues over the next 10 years, according to the nonpartisan Congressional Budget Office. CBO estimates the individual mandate will bring in another $45 billion.
“It does undermine some of the funding,” said Julie Barnes of the healthcare consulting firm Breakaway Policy. CBO forecast in May that the employer mandate would generate about $10 billion in revenue for federal fiscal year beginning October 1, 2014, rising to $20 billion a year in 2023.