The Obama Administration announced on Tuesday that it is delaying implementing a key component of the Affordable Care Act for a year following complaints from the private sector about reporting requirements. The so-called “employer mandate”, which penalizes employers with more than 50 employees if they fail to provide a minimum standard of affordable health insurance, was set to kick in in 2014, but now will take effect in 2015, the Treasury Department announced in a blog post late Tuesday. The delay not only allows the Administration time to ease concerns among business owners, but also takes a controversial component of the law off the table before the 2014 midterm elections. Enactment of the Affordable Care Act is expected to be a topic of debate in campaigns over the next few years, but Democrats running for the House and Senate in 2014 won’t have to answer questions about a newly applied employer mandate.
In the memo, Assistant Treasury Secretary for Tax Policy Mark Mazur explained the delay, saying:
“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. Within the next week, we will publish formal guidance describing this transition. Just like the Administration’s effort to turn the initial 21-page application for health insurance into a three-page application, we are working hard to adapt and to be flexible about reporting requirements as we implement the law.”
The memo went on to say: “Once these rules have been issued, the administration will work with employers, insurers and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015. Real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.”
The delay prevents the federal government from collecting a year of penalties that would have been paid by companies that do not meet the law’s requirements. Republicans had warned of a decline in hiring as a result of the mandate. The requirement was expected to have the largest impact on major chain hotels, restaurants and retail stores, the AP said. Some companies with payrolls near the 50-worker cutoff point said they would consider eliminating jobs or switching some full-time workers to part-time status to avoid having to offer insurance coverage, The New York Times reported.
Tuesday’s announcement of the delay in implementing employer insurance coverage does not affect the central provision of the Affordable Care Act – that most Americans carry health insurance or face a fine in the form of a tax penalty, with tax credits provided to those who can’t afford coverage. This so-called “individual mandate” was upheld as constitutional last year by the U.S. Supreme Court.
Peter Berg also contributed to this article.Copyright © 2013, Sheppard Mullin Richter & Hampton LLP.