The White House on Tuesday delayed for one year a requirement under the Affordable Care Act that businesses provide health insurance to employees, a fresh setback for President Obama’s landmark health-care overhaul as it enters a critical phase.
The provision, commonly known as the employer mandate, calls for businesses with 50 or more workers to provide affordable quality insurance to workers or pay a $2,000 fine per employee. Business groups had objected to the provision, which now will take effect in January 2015.
The decision comes as Obama is working to secure his domestic legacy, urging Congress to pass an overhaul of immigration laws and using his executive powers to combat climate change. With the prospects for immigration reform uncertain in the House — and new environmental regulations still more than a year way — implementation of the 2010 health-care law has singular importance.
The White House portrayed the delay as a common-sense step that would reduce financial and regulatory burdens on small businesses. Republicans, who are planning to target “Obamacare” in the 2014 midterm campaigns, said the delay is an acknowledgment that the health-care overhaul is flawed.
The decision will spare Obama what might have been a major distraction as officials begin to implement the centerpiece of the health-care law, which remains in place: a requirement, starting in 2014, that most Americans obtain insurance through their employer or through federally backed and state-backed marketplaces, known as exchanges.
The decision by Obama, who was on Air Force One returning from Africa on Tuesday when the announcement was made, to delay a controversial part of the law underscores his willingness to use the power of the executive branch to help to protect the legislation’s image at a defining moment.
“We believe we need to give employers more time to comply with the new rules,” Valerie Jarrett, a senior adviser to Obama, wrote in a blog post Tuesday evening. “This allows employers the time to . . . make any necessary adaptations to their health benefits while staying the course toward making health coverage more affordable and accessible for their workers.”
Republicans say they expect higher costs as a result of the law. House Speaker John A. Boehner (Ohio) said the decision “means even the Obama administration knows the ‘train wreck’ will only get worse.” He added, “This is a clear acknowledgment that the law is unworkable.”
Bob Kocher, a former top health-care aide to Obama, said he was disappointed by the delay because it will create uncertainty about what parts of the law will take effect. “It confuses people,” he said, adding that it “will undermine all the other rules because people will expect delay.”
The health-care law, which had been a source of confusion for years, is expected to have a bumpy rollout. The employer mandate would have added complexity.
Small businesses, many of which would have had to install systems to track and report which employees are receiving coverage, had been complaining about the difficulty of complying with the requirements, giving way to fears that companies might reduce their workforces to fall below the 50-worker threshold.
The decision comes as a result of years of bumps and setbacks for the overhaul, including legal challenges and political opposition that have hampered its implementation. Last summer, the Supreme Court upheld the law but struck down a mandatory expansion of Medicaid. State officials and businesses held off changing their policies through the 2012 presidential campaign because Obama’s GOP opponent, Mitt Romney, had promised to repeal the law.
Some populous states, including Florida and Texas, have decided not to set up exchanges, putting a far bigger burden on federal health officials to serve Americans. The exchanges are being designed to offer a variety of insurance plans; the federal insurance exchange is set to begin in less than three months.
Although the overhaul was passed in 2010, federal officials continue to issue clarifications to its language. Many of the rules critical to employers were issued this year, or remain in draft form. As a result, businesses have been scrambling to understand their obligations, said Larry Levitt, senior vice president of the Kaiser Family Foundation, a nonpartisan health think tank.
“When I talk to large companies, even though they already offer coverage they are still scrambling to understand the rules so they can comply,” he said. “Employers were feeling like they had to make these decisions under some amount of pressure, and this gives them a year to be more deliberative about it.”
A senior White House official said the administration’s decision goes beyond delaying the employer mandate. Officials also are working to simplify the depth of information that businesses will have to provide to the government about the coverage they offer.
The launch of the exchanges is a landmark moment in the overhaul, and White House officials have been warning that there will be rough spots. The White House hasn’t received the funding it requested to implement the law, and officials have expressed concern that Americans eligible for coverage won’t know how to get it.
Earlier this year, the administration said businesses that buy health plans for their workers through health exchanges would not have access to the full range of options in 2014, promising to have them in place a year later.
The decision to postpone the employer mandate is not expected to have a major impact on employees. Those workers who would have received coverage from their employers as a result of the law will now be expected to use the exchanges. Employees who cannot afford coverage on their own are eligible for federal subsidies.
The vast majority of businesses — 96 percent, according to the White House — have fewer than 50 employees and therefore are exempt from the mandate. And nearly all firms of 200 or more workers offer their employees some sort of coverage, according to the Kaiser Family Foundation.
“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mark J. Mazur, an assistant Treasury secretary, wrote in a blog post. “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 that Treasury, which oversees part of the law, will issue more details about the delay within a week.
Several business groups praised the administration, saying the delay will give businesses time to adjust to the new requirements.
“This one year delay will provide employers and businesses more time to update their health care coverage without threat of arbitrary punishment,” Neil Trautwein, a top official with the National Retail Federation, said in a statement. “We appreciate the Administration’s recognition of employer concerns and hope it will allow for greater flexibility in the future.”
But others maintained that the provision will never be workable.
“Temporary relief is small consolation,” said Amanda Austin, director of federal public policy with the National Federation of Independent Business, which last year lost the landmark Supreme Court case challenging the law’s constitutionality.