WASHINGTON -- One day after the Obama administration delayed the Affordable Care Act’s employer mandate until 2015, critics and supporters of the legislation were hotly debating the cost and effects of the surprise move, while business owners breathed a sigh of relief.
The law required companies with more than 50 full-time employees to provide health coverage in 2014 or face fines of $2,000 per worker. By giving business owners like Zach Davis of Santa Cruz, Calif., an extra year to ponder their next moves, employers may be more comfortable that they’re making an informed decision rather than taking a chance on legislation that is still unfolding more than three years after its passage.
Although Davis’ restaurant and ice cream shop isn’t subject to the mandate because most of his employees work part time, he had been considering expanding his employee coverage through the new health insurance exchanges that are scheduled to come online in October.
“If I had all the information about what the exchanges would do for us in front of me right now, that would be great and I would probably be prepared, as we move toward our (health plan) renewal date, to take that into account,” Davis said. “But given that we might not get that (health plan cost) information until August or September, it makes the window pretty small and it definitely increases the likelihood that we’ll just renew with what we have, see how things shake out with the exchanges and then be in a position to make a really good decision come the end of 2014.”
While Beltway lawmakers and stakeholders were surprised by the decision to postpone enforcement of the employer mandate, Davis, 37, said he was not caught by surprise.
“At this point, with so many things still up the air this late in the game, it doesn’t shock me that something had to be delayed,” he said. “I wanted to believe it could be done in the timetable that was initially laid out because I do think, on balance, it’s a program that would be good for this country. But I also understand it’s a pretty complex, pretty monumental initiative to put in place.”
The delay is the second this year to significantly affect the rollout of the Affordable Care Act. In the spring, the Obama administration said small businesses that want to offer employee coverage through the exchanges will only be able to select one plan in the 34 states where the marketplaces are run by the federal government.
Tuesday’s delay will be costly.
The Congressional Budget Office estimates the federal government will lose $10 billion in employer penalties in 2015 because of the delayed enforcement. Likewise, many expect that federal outlays to help low- and moderate-income people purchase coverage will grow with employers no longer required to provide coverage next year.
“At a minimum, the federal revenue from fines is gone. More realistically, the costs of already bloated insurance subsidies will escalate and the red ink will rise,” said Douglas Holtz-Eakin, president of the American Action Forum, a conservative think tank.
Jon Gruber, an MIT economist who helped design the federal health law, said the decision to forego the $10 billion in penalties was both pragmatic and political.
“Basically, it was their judgment that it was causing too many logistical and political headaches and it wasn’t that essential to the law, so they decided to just delay it a year and live with the revenue loss,” Gruber said Wednesday.