Delay in Employer Health Mandate Estimated to Cost $12 Billion

August 2, 2013

The Obama administration's move to delay a mandate on businesses to provide health coverage will mean $12 billion in lost tax revenue and additional costs. The nonpartisan Congressional Budget Office (CBO) said 1 million fewer people will get employer coverage in 2014 as a result of the postponement, and half of those will turn to new government health insurance exchanges or Medicaid for coverage, says the Wall Street Journal.

Earlier this month, the Treasury Department said it was delaying for one year the enforcement of penalties that could be charged to employers with 50 or more people for not providing adequate health insurance in 2014. The department also delayed various reporting requirements.

The Obama administration said the delay was meant to give businesses more time to comply with the law. Final rules directing employers on how to comply haven't been released and computer systems haven't been configured to handle data from employers on which of their employees had health insurance.

  • The CBO, in a letter sent to House Budget Committee Chairman Paul Ryan (R-Wisc.) and other lawmakers, said the delay of the employer mandate would result in the loss of a projected $10 billion in employer penalties that would have been assessed in 2014 and collected in 2015.
  • Costs for insurance exchanges that will allow people to sign up for health insurance starting in October will increase by $3 billion, according to the CBO, because some people will turn to the exchanges if they can't get coverage from their employers.
  • The CBO said about $1 billion of the total cost increase will be offset by things such as a greater overall amount of taxable compensation, since fewer people would be getting health insurance through their jobs, where it is paid for with pretax dollars.

Overall, the CBO has projected that the 2010 Affordable Care Act would have a positive impact on the federal government's budget deficit during the next decade, partly because of a reduction in Medicare spending.

Some Republicans and conservative groups have said there was little to stop people from reporting a lower income to qualify for subsidies to pay for health insurance. Under the health law, people with incomes up to 400 percent of the federal poverty level (or about $94,000 for a family of four) will be eligible for tax credits to help buy health insurance. Enrollment for insurance coverage starts Oct. 1.

Source: Jennifer Corbett Dooren, "Delay in Employer Health Mandate Estimated to Cost $12 Billion," Wall Street Journal, July 30, 2013.

 

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