By Elise Viebeck, Sam Baker and Amie Parnes - 07/03/13 02:08 PM EDT
The ObamaCare employer mandate requiring businesses to provide their workers with health insurance will be delayed by a year, the administration said Tuesday in a stunning announcement. [WATCH VIDEO]
Delaying the requirement until 2015 is an enormous victory for businesses that had lobbied against the healthcare law.
White House officials cast the delay as a decision necessary to give employers more time to comply with the rules, while Republicans said it showed President Obama's signature legislative achievement was fatally flawed.
Former Obama adviser David Axelrod on Wednesday insisted history would look kindly on the law.
President Obama’s “view is that we ought to plow forward, make sure this can work, and we're going to look back at it, and it's going to be our proudest accomplishment," Axelrod said on MSNBC's "Morning Joe."
In a White House blog post, senior adviser Valerie Jarrett wrote Tuesday that the delay would give employers more time to adjust to the system.
“This allows employers the time to test the new reporting systems and make any necessary adaptations to their health benefits while staying the course toward making health coverage more affordable and accessible for their workers,” Jarrett wrote.
Jarrett also wrote that the delay would help in “cutting red tape and simplifying the reporting process.”
“We have heard the concern that the reporting called for under the law about each worker’s access to and enrollment in health insurance requires new data collection systems and coordination,” Jarrett said. “So we plan to re-vamp and simplify the reporting process.”
The Treasury Department’s announcement does not affect the individual mandate, which requires most taxpayers to either purchase insurance or pay a penalty, and administration officials said on Tuesday that other aspects of the law wouldn’t be delayed.
The law’s critics have framed that as a double standard, accusing the administration of acknowledging the law’s complexity for businesses without offering a similar break to the individual workers who still have to buy insurance. The employer mandate affected businesses with more than 50 workers.
“That the Obama administration is putting off this job-killing requirement on employers, but not individuals and families, shows how deeply flawed the president’s signature domestic policy achievement is,” said Sen. Orrin Hatch (Utah), the ranking Republican on the Senate Finance Committee.
“While a delay of this mandate is welcome news since it shows the challenges the employers are facing complying with it, a delay — conveniently past the 2014 election — only adds to the uncertainty these job creators face because of ObamaCare,” Hatch said.
Other Republicans seized on the news, arguing that the delays suggested the law was a “train wreck” and that Democratic candidates in 2014 would have difficulty explaining the delay.
Speaker John Boehner (R-Ohio) and House Majority Leader Eric Cantor (R-Va.) renewed their calls for repealing the law in full.
“This further confirms that even the proponents of ObamaCare know it will hurt jobs, decrease economic growth and make it harder for families to have access to quality and affordable health care,” Cantor said in statement.
“Rather than continuing to delay the predictable pain until another Election Day has passed, we should scrap this entire law and instead implement patient-centered reforms before any more damage is done,” he said.
While GOP leaders were quick to react, hammering the delay as evidence that the law is unworkable, Democratic leaders were quieter Tuesday evening. One exception was Democratic National Committee Chairwoman Debbie Wasserman Schultz (Fla.), who tweeted that the decision shows Obama is “in it for long haul to fully implement” the healthcare law.
Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid (D-Nev.) said the administration was showing "a willingness to be flexible.”
"It is better to do this right than fast,” said Jentleson in a statement.
Some Democrats had openly fretted about the law’s implementation.
Sen. Max Baucus (D-Mont.), one of the primary architects of the healthcare law, warned in April that small businesses were struggling to come to grips with their new responsibilities.
“Small businesses have no idea what to do, what to expect,” Baucus told Health and Human Services Secretary Kathleen Sebelius at a hearing.
“I just see a huge train wreck coming down,” Baucus said.
The Chamber of Commerce praised the delay.
“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 Randy Johnson, the Chamber’s senior vice president for labor, immigration and employee benefits.
“The Chamber has testified numerous times about the problems with the mandate, and we applaud the administration’s step to delay this provision. We will continue to work to alleviate this and other problems with ObamaCare.”
Many employers had threatened to cut employees’ hours to avoid the new requirements.
Employers had also complained about the mandate’s reporting provision. Rules on the requirement came out this year, leaving little time for businesses to respond and prepare.
“I hope that this means that employers who have been cutting employees to part-time will now call them back to full-time employment, but regret that the administration is delaying the implementation of an important provision of the ACA,” said Timothy Jost, a law professor at Washington and Lee University and a strong supporter of the healthcare law.
The change will likely mean that more people buy individual coverage through the law’s new insurance exchanges, which are expected to be open for enrollment by Oct. 1.
If fewer employees have access to coverage through work, at least some are likely to turn to the exchanges for coverage and the tax credit that helps cover the cost.
Hatch said he hoped that was not the administration’s goal, stating it could be a “backdoor attempt at getting more Americans into the exchanges, which have been plagued by problems.”
More people on the exchanges would also mean greater federal spending on the tax subsidies, increasing the law’s total cost.
Sabrina Corlette, a health policy expert at Georgetown University, said the move could be a boon to consumers because plans on the exchanges will be stronger than those offered by many employers.
She worried, however, that the employer mandate could be deferred again down the line.
“Anyone that’s been around politics long enough knows to be a little bit concerned,” Corlette said. “If a one-year delay is OK, how about a two-year delay? How about a three-year delay?”
The political effects of the delay could be more severe than the effect on the law’s expansion of healthcare coverage. One vulnerable Democrat, Sen. Mark Begich (Alaska), hailed the decision.
“I’m pleased the administration is listening to me and the many businesses that are concerned about the complexity of the new requirements,” said Begich, who is facing reelection in 2014.
In its most recent estimates before the delay was announced, the Congressional Budget Office said the number of people with employer-based coverage was not expected to change next year.
The penalty for employers that failed to offer coverage was also not expected to bring in any money next year, according to the CBO’s latest estimates.
The delay gives employers a free year to dump their workers into the law’s insurance exchanges, former Congressional Budget Office Director Douglas Holtz-Eakin said.
“Essentially for calendar 2014, the act of dropping coverage and dumping employees into the exchanges is on sale,” he said. “Drop and dump, but no penalty.”
—This story was posted at 5:37 on July 2 and was last updated at 10:08 a.m. on July 3.