White House Extends Employer Mandate Deadline

Employers have an additional year—until Jan. 1, 2015—before reporting requirements mandated by the Patient Protection and Affordable Care Act go into effect. The unexpected policy decision comes in response to employer concerns about the complexity of data reporting requirements.

In a surprising announcement Tuesday afternoon the Obama administration said it would delay until Jan. 1 2015 a key provision of the Patient Protection and Affordable Care Act that requires mid-sized and large employers to provide health insurance for their workers or pay a fine.

Mark J. Mazur, assistant Secretary for Tax Policy at the U.S. Department of the Treasury, said on a blog posting that the decision to roll back the implementation date for businesses with 50 or more employees was made after "several months" of negotiations with businesses.

"We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively," Mazur said in the blog. "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. "

As unexpected as news was, the responses from key stakeholders and critics in the healthcare reform debate were predictable.

House Speaker John Boehner, (R-OH) said in prepared remarks that "this announcement means even the Obama administration knows the 'train wreck' will only get worse. I hope the administration recognizes the need to release American families from the mandates of this law as well. 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."

Business groups cheered the news.

"We commend the Administration's wise move to delay the employer reporting and penalty obligations under the Affordable Care Act. This one-year delay will provide employers and businesses more time to update their healthcare coverage without threat of arbitrary punishment," said Neil Trautwein, with the National Retail Federation.

"The National Retail Federation has worked hard to engage and educate our diverse membership on the upcoming ACA requirements and consistently and empathetically called on the Administration to delay these specific regulations. We appreciate the Administration's recognition of employer concerns and hope it will allow for greater flexibility in the future."

Robert Zirkelbach, spokesman for America's Health Insurance Plans, said the insurance lobby "appreciates that the administration is being responsive to the concerns employers and insurers have raised about the workability of the reporting requirements related to employer healthcare coverage."

In a separate blog posting Tuesday afternoon, Valerie B. Jarrett, a senior White House advisor, said the administration would also cut red tape and simplify reporting processes for employers. "We have heard the concern that the reporting called for under the law about each worker's access to and enrollment in health insurance requires new data collection systems and coordination," Jarrett wrote.

"So we plan to re-vamp and simplify the reporting process. Some of this detailed reporting may be unnecessary for businesses that more than meet the minimum standards in the law. We will convene employers, insurers, and experts to propose a smarter system and, in the interim, suspend reporting for 2014."

Brian Haile, senior vice president for healthcare policy at Jackson Hewitt tax consultants said the delay should alleviate concerns raised by employers, particularly those with significant seasonal and part-time worker

"The federal approach acknowledges the challenges with implementing a policy that will affect so many employers—and strikes the right balance between speedy implementation and thoughtful policymaking," Haile said.

Haile, in an email exchange with HealthLeaders Media, identified several potential effects of the implementation delay for employers:

• Fewer employers may cut employee hours in 2014. This one-year respite may make employers (e.g., restaurant and retail establishments) less likely to reduce employee hours below 30 hours per week.

• Many families with children will have an unexpected benefit. For employers who offer employee but not dependent coverage, this one-year delay may also cause employers to postpone any offer of coverage to dependents. Interestingly, this may have a positive effect on such families for two reasons. First, children without an offer of employer-sponsored coverage may be eligible for the Children's Health Insurance Program if they meet the state-specific income and other eligibility requirements. Second, children without an offer of employer coverage may be eligible for the new premium assistance tax credits in 2014 even if their incomes are above the state-specific CHIP limit. Indeed, employers may be more likely to cooperate with enrollment efforts to get uninsured employees and their uninsured dependents covered under various ACA programs because they know with certainty that they will not face a penalty in 2014.

• States may face less pressure from business interests to expand Medicaid. Jackson Hewitt had released a report earlier this year estimating that American employers would incur $876 million to $1.3 billion in penalties in 22 states that were refusing to expand their Medicaid programs as contemplated under the ACA. Today's decision effectively removes that penalty liability for 2014. However, employers will continue to face such penalties in 2015 and thereafter in states that do not expand their Medicaid programs.

• The Treasury action today addresses anxiety among employers about the lack of final regulations from the IRS. While many employers with large part-time and seasonal employees embraced the flexibility afforded to them by the IRS' proposed approach, they voiced increasingly loud concerns that the IRS had yet to finalize this approach in a final rule. Indeed, the IRS has not publicly pledged to finalize these proposed rules before the major provisions of the ACA take effect in 2014. In an unexpected development late Tuesday, though, the Treasury Department effectively moots this issue for 2014.

Formal guidance from the White House is expected within the next week.