Mounting pressure, looming deadline led to surprise employer mandate delay

The Obama administration’s bombshell decision to hold off on penalties for employers that don’t provide insurance to their workers came under fierce pressure from business groups, who warned that unresolved questions would cause havoc.

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In meeting after meeting, groups that represent employers told White House and agency officials that enacting the contentious Affordable Care Act provision as scheduled on January 1 would be a mistake, according to several participants. 

Despite the increasingly loud drumbeat of criticism, however, the administration showed no signs of wavering before announcing Tuesday that businesses with more than 50 workers had an additional year to offer insurance or face penalties. 

“We definitely did not expect this,” said Judith Thorman, senior vice president of government relations and public policy at the International Franchise Association. 

At issue for employers, Thorman and others said, was uncertainty flowing from unfinished regulations, with just six months before it was to take effect. Businesses complained relentlessly that clarity was needed for requirements on how information would be reported to the Internal Revenue Service (IRS). 

“There was a lot of pressure. The law goes into effect in January, and all the regs aren’t out,” Thorman said. “Employers and employees were confused.”

Even if all the regulations were finalized, business groups worried they would not have time to adapt to them in time to avoid violating the rules. 

“We need the time, once we have the rules, to make the changes to comply,” said Michelle Neblett, director for labor and workforce policy for the National Restaurant Association. 

In meetings with the administration stretching back more than a year, the group has pushed for streamlined reporting requirements that would not place an undue burden on businesses.  

For instance, the restaurant association favors a system under which businesses would only have to report to the IRS information about employees that trigger a penalty – not all employees, Neblett said. 

Thorman and others with knowledge of the talks described collegial meetings over many months between businesses groups – sometimes separately, sometimes together – and representatives of the Internal Revenue Service, the Treasury Department and the White House. 

The administration officials asked questions and listened to industry concerns, but made no indication they were being swayed, according to multiple attendees. 

“You didn’t really get the sense there was movement,” Thorman said. 

So it was that Tuesday’s announcement surprised many groups critical of the mandate and accompanying reporting rules. 

National Retail Federation (NRF) vice president Neil Trautwein lauded not only the decision, but also the exhaustive process by which the administration solicited feedback from businesses. 

He said he’d never in a 30-year career spent more “quality time” with agencies and regulators than he has during the healthcare discussions. In some cases, administration officials came to meet with the NRF, instead of summoning the group to Pennsylvania Avenue. 

Trautwein said he didn’t believe there was a “smoking gun” moment during the discussions when the administration abruptly shifted positions on the mandate’s timing, and that it was more likely a “long running process decision.” 

He acknowledged that delaying the contentious rule was not an easy choice for the administration.  

“I think it was an extraordinary – and even courageous – move by the administration to say they aren’t ready,” Trautwein said. 

Some saw White House Senior Adviser Valerie Jarrett’s fingerprints on the decision. 

“Valerie Jarrett has met with many, many business groups, and I suspect that is why she was the face of this decision,” Thorman said. 

It was Jarrett who detailed the announcement in a blog post published to the White House’s blog. 

Beyond giving businesses until January of 2015 to comply with the employer mandate, she said the administration would draft a simpler set of reporting rules, with help from the private sector. 

“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 wrote.  “We will convene employers, insurers, and experts to propose a smarter system and, in the interim, suspend reporting for 2014.”

On Wednesday, the section of the IRS’s website devoted to providing the public information about the mandate contained only the message, “Updated questions and answers will be posted soon. Please check back.” 

Yvette Fontenot, who worked on Affordable Care Act issues as both senior policy director in the White House’s Office of Health Reform and deputy director of the Department of Health and Human Service’s Office of Health Reform, said the decision is evidence of the administration’s flexibility. 

“There was a tremendous amount of outreach on both sides to see what’s doable,” said Fontenot, who now works at the government affairs firm Avenue Solutions. 

But for employers, the announcement is small consolation and would only postpone painful consequences of the mandate, said Amanda Austin, director of federal public policy for the National Federation of Independent Business (NFIB).

Critics of the mandate, for example, say its language defining a full-time employee as one that works 30 hours in a week gives companies an incentive to limit employee hours to avoid paying penalties. 

While Austin agreed simpler reporting standards would be a positive development, “you’re just changing the form from 15 pages to eight pages,” she said.  

“At the end of the day, we’re still going to get the net result of the mandate,” she said. “Serious negative effects on the economy.”