President Barack Obama's historic health care reform took an unforeseen detour Tuesday when the administration announced it would give large employers a one-year extension, until 2015, to meet their responsibilities under the "employer mandate" portion of the Affordable Care Act.
As written, the law's employer mandate provision would have required companies that employ more than 50 full-time workers to offer affordable insurance to their workforce starting in 2014 or face fines of up to $3,000 per employee. They'll now have an additional 12 months to align their group plans with the law.
Senior White House adviser Valerie Jarrett said the one-year extension gives large employers the additional time they requested to adjust their health plans to comply with the new requirements. She added that officials would use the extra time to make the accompanying reporting requirements less onerous on employers.
Other parts of the law still on track
The move has no effect on either the "individual mandate," which requires all but exempt Americans to obtain health insurance by Jan. 1, 2014, or face a penalty, or the scheduled Oct. 1 opening of new state marketplaces for individuals and small businesses. However, it will likely make it difficult to determine which lower-income employees of large companies qualify for federal health care subsidies during the one-year extension period.
According to a White House fact sheet, more than 96 percent of large companies already offer health insurance to their employees. Despite declarations from some service-industry employers that they would proactively slash hours to reduce their full-time workforce, a monthly tally of layoffs released Wednesday by the outplacement firm Challenger, Gray & Christmas found that just 618 jobs nationally had been cut this year due to health care reform, all of them in the health care field.
Split reactions to the delay
The concession drew rare praise from business groups that have been outspoken opponents of Obamacare. "The administration has finally recognized the obvious -- employers need more time and clarification of the rules of the road before implementing the employer mandate," said U.S. Chamber of Commerce Senior Vice President Randy Johnson. And Neil Trautwein of the National Retail Federation commended the administration for "a wise move" that "will provide employers and businesses more time to update their health care coverage without threat of arbitrary punishment."
But consumer advocates such as Ron Pollock, executive director of Families USA, argued that the extension brings "a potential for some harm" by giving a free one-year pass to employers who currently provide substandard coverage to their employees.
The employer mandate extension is not the first adjustment the administration has made in its uphill push to implement the Affordable Care Act. In 2011, officials indefinitely tabled the act's long-term health care insurance provision when the numbers refused to add up, and earlier this year they made course corrections to the Small Business Health Options Program, or SHOP, and plans to establish state-based nonprofit insurers.
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Jay MacDonald is a Bankrate contributing editor and co-author of "Future Millionaires' Guidebook," an e-book by Bankrate editors and reporters.