Obamacare Delay Increases Costs and Complications

Putting off a minor provision could have a ripple effect on the Affordable Care Act

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President Barack Obama speaks about Affordable Care Act at The Fairmont Hotel on June 6, 2013 in San Jose, Calif.

For a massive law that will reorganize nearly the entire U.S. health care system, the one-year delay of a relatively minor provision would seem a mere blip. But the Obama Administration’s recent announcement that the Affordable Care Act’s (ACA) employer mandate will kick in a year late could ripple beyond the brief extension, increasing costs and complicating implementation of other vital parts of the law.

In delaying the employer mandate — which requires companies with more than 50 employees to provide health insurance to workers or pay federal penalties — the Obama Administration is yielding to pressure from some business leaders who have been critical of the provision and tacitly acknowledging Obamacare’s potential as political kryptonite. As Republican opponents have pointed out, the move conveniently removes the issue from the 2014 elections. These Republicans are now calling for an investigation into the delay.

(MORE: Delay in Obamacare Law Provision Raises Doubts at Critical Stage of Rollout)

“It was obviously generating a lot of vocal complaining, and there were some technical issues the Administration wanted more time to work on anyway,” says Paul Van de Water, a federal-budget expert at the left-leaning Center on Budget and Policy Priorities. The delay “was more of a way of indicating flexibility and responsiveness to employers’ concerns.”

The vast majority of large employers that would be subject to the mandate already offer insurance to workers. “The practical effect of the employer mandate on coverage in 2014 is not going to be very large,” Van de Water notes. Yet, the decision to delay its implementation by a year shows the White House is hitting unexpected bumps as it rolls out the law. Just days after announcing the mandate delay, the Administration eased subsidy-eligibility-verification requirements for the 16 states that have opted to run their own private insurance exchanges (the marketplaces where private insurance will be sold beginning next year).

This week the Administration said it was hiring Clinton-era health-care-policy expert Chris Jennings to assist with ACA implementation. He will have his hands full. On July 9, one day after his new job was announced, the conservative group Americans for Prosperity rolled out a reported $700,000 television ad campaign in Ohio and Virginia meant to further erode public confidence in Obamacare. “Can I really trust the folks in Washington with my family’s health care?” asks the spot’s main character, a young mother.

Whatever political benefit the Administration accrues in the delay will come at taxpayer expense, as the move will increase the cost of Obamacare. The provision was expected to generate some $10 billion in revenue in the form of penalties that employers not offering coverage would have incurred in 2014. Adding to that cost is the fact that many workers whose employers decide not to offer coverage in 2014 will now be eligible to receive federal subsidies to buy individual insurance policies through state or federal exchanges. The delay does not change the ACA’s individual mandate, which requires nearly all Americans to have insurance coverage beginning in 2014.

The eventual cost of the federal subsidies made available by Obamacare is one piece of the law likely to remain in flux for years to come. The Supreme Court’s 2012 decision to make the ACA’s state-by-state Medicaid expansion optional increased the number of people eligible for subsidies in states that are not growing their Medicaid programs as the law originally called for. (About half of all states are fully on board with the expansion, while the rest are refusing outright or designing alternate coverage plans for the poor.) And while the Congressional Budget Office has estimated that some 20 million Americans will be eligible for subsidies by 2023, the cost of subsidizing this population is dependent on income and employment and subject to changes in the economy.

MORE: And Now, the Selling of Obamacare

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