AFFORDABLE CARE ACT DELAYED

On Tuesday, July 2, 2013, the Obama administration announced a one-year delay for the requirement under the Affordable Care Act (ACA, or “Obamacare”) that employers provide workers with health insurance. That requirement, called the “employer mandate” or the “pay or play mandate,” was to go into effect on January 1, 2014, and has been delayed until January 1, 2015.

According to Valerie Jarrett, senior advisor to the President, the administration approved the delay because employers needed “more time to comply with the new rules,” and that the delay would help in “cutting red tape and simplifying the reporting process.”

Under ACA, employers with over 50 full-time employees face penalties if they fail to offer employees “affordable coverage,” i.e., coverage at a premium cost that did not exceed 9.5% of the employee’s household income. Employers who fail to offer any coverage, or offered coverage that was not affordable, or did not provide minimum “essential coverage” as defined by ACA, would be fined. The penalty has been suspended until January 1, 2015.

The employer mandate received strong objection from the business community because of the associated cost and complexity. Many businesses, notably the restaurant and retail industries, had threatened to cut workers or their hours (to drop the number of fulltime employees below 50) to avoid the penalties.

The delay does not affect the implementation of the state insurance exchanges, which are still scheduled for open enrollment beginning October 1, 2013. According to the Government Accountability Office, the exchanges are expected to provide federally subsidized health coverage for an estimated 7 million people in 2014 and 22 million by 2016.