The Baltimore Sun

By Noam N. Levey, Tribune Washington Bureau

— The Obama administration plans to postpone a key requirement of the president’s health law, delaying until 2015 penalties on large employers that don’t offer health coverage.

The one-year delay, announced by the Treasury Department late Tuesday in response to complaints from businesses, marks a major retreat in the plan to implement the 2010 Affordable Care Act.

And it underscores the immense pressure the administration is under as it tries to roll out extremely complex provisions of the law. By next year, most Americans were supposed to have been guaranteed access to health coverage by the law even if they have pre-existing conditions.

“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mark J. Mazur, the assistant treasury secretary for tax policy, wrote in a post on the department’s website.

Mazur stressed that other key parts of the law remain on track to be implemented next year, including a system to provide tax credits to help low- and moderate-income Americans buy health insurance, if their employers do not provide benefits.

The law’s requirement that companies with more than 50 full-time workers provide health insurance is designed to prevent firms from dropping health benefits once the government offers subsidies to help individuals buy insurance. The law’s authors worried that would tempt firms to stop offering coverage, shifting the cost of healthcare to the government.

Douglas Holtz-Eakin, a former director of the Congressional Budget Office who now heads the conservative American Action Forum, warned that employers would have an incentive to drop coverage.

But several business leaders and experts said the delay is unlikely to prompt many businesses to change their benefits strategies.

Businesses “know these rules will go into effect sooner or later,” said Bill Kramer, executive director for national health policy at the Pacific Business Group on Health, a nonprofit coalition that includes large employers such as Boeing Co. and Walt Disney Co.

Neil Trautwein, vice president of the National Retail Federation, said he expected few of his members to make changes to their health plans until it was clear what would happen in 2015.

The administration’s announcement, which also means that one of the law’s most controversial provisions will not be implemented until after the 2014 midterm elections, drew swift praise from leading business groups, including those representing restaurants and retailers, whose members have been chafing at the law’s myriad requirements.

Ellen Valentino, the director of the Maryland chapter of the National Federation of Independent Businesses, said some small businesses and restaurants had been struggling with the requirement that employees working more than 30 hours a week get health insurance.

“This is a welcome reprieve from what was clearly becoming a looming deadline,” Valentino said. “I think this is going to give everyone a chance to take a step back, review the impact and take a look at some necessary changes.”

In an interview, Trautwein compared the decision to “pre-July 4 fireworks.” “This is a pragmatic decision that recognizes that employers were not ready, the administration was not ready and the exchanges were not ready.”

American Benefits Council President James A. Klein said the delay would provide “vital breathing room to implement the law in a more thoughtful and administrable way.”

Vincent DeMarco, president of the Maryland Citizens Health Initiative, said the delay did not bother him and that he was “thrilled” that it would go into place, even if it were late.

“The fact that it’s going to be another year is not a big deal,” he said. “This one requirement being delayed a year is not a problem and the good news is that it’s going to happen.”

In Maryland, roughly 750,000 people are uninsured, said Peter Beilenson, a former Baltimore health commissioner and Howard County health officer. He now heads Evergreen Health Cooperative Inc., a consumer-owned nonprofit that will sell health policies.

But all but about 50,000 to 80,000 of those uninsured will still be able to get insurance at the beginning of 2014 under the Affordable Care Act’s Medicaid expansion and the subsidized insurance exchanges, Beilenson said.

“The bottom line for Marylanders is that a vast majority of those who would have been eligible for new coverage under the Affordable Care Act will still be able to get that coverage on January 1,” he said.

Practically speaking, it “makes sense” to break the complicated law’s implementation into stages, Beilenson said. Still, he added, having any uninsured people at all strains the resources of hospitals and taxpayers.

Republican lawmakers on Capitol Hill, who are still trying to derail implementation of the law, kept up their criticism.

“This announcement means even the Obama administration knows the ‘train wreck’ will only get worse,” House Speaker John A. Boehner, an Ohio Republican, said in a statement. “I hope the administration recognizes the need to release American families from the mandates of this law as well.”

The administration has given no indication that it plans to delay the penalty on Americans who do not get coverage, which is slated to start at $95 next year.

The so-called employer mandate is not as central to the law as other provisions of the huge legislation.

Coverage rates are already very high among large and medium-sized businesses. Among employers with more than 200 employees, 98 percent offer health benefits, according to an annual survey by the nonprofit Kaiser Family Foundation and the Health Research & Educational Trust. And 94 percent of employers with between 50 and 199 employee provide health insurance, the survey found.

Under the law, large employers that did not provide coverage would be fined $2,000 per employee beyond the first 30 employees.

Small businesses are less likely to offer health benefits, but these employers are exempt from the health law’s mandate.

The mandate nonetheless has been a lightning rod for criticism in the business community, particularly for employers that rely on part-time workers.

The complex method used to assess penalties on employers required multiple computer systems to track the number of hours employees worked, whether they could afford coverage and whether they qualified for federal aid if they did not get health insurance at work.

Particularly nettlesome for many employers is the law’s system of calculating full-time and part-time workers. The law exempts employers with fewer than 50 employees who work at least 30 hours a week.

That system prompted warnings from many businesses and even some supporters of the law that many employers would shift employees to part-time work to avoid the penalty.

The Treasury Department indicated Tuesday it would provide further details later this summer about how it will implement the penalty in 2015.

Baltimore Sun reporter Carrie Wells and Tribune Newspapers staff writer Chad Terhune in Los Angeles contributed to this article.

Last modified: July 3, 2013