The Obama administration's abrupt decision to postpone the requirement that larger employers provide affordable health insurance or pay penalties is a significant setback for health care reform. It gives opponents of the Affordable Care Act in the Florida Legislature and elsewhere another reason to be obstructionists. It fuels more public confusion about the law, and it raises concerns about Washington's ability to smoothly implement the changes. The public relations campaign to sell Americans on the law's benefits just got tougher, and the pressure on the administration to avoid more problems just increased.
The health care law requires companies with at least 50 full-time workers to provide affordable health coverage or face escalating penalties. The size of the tax penalties depends on whether the company offers no insurance or insurance that is unaffordable, and how many of its employees instead use government subsidies to buy health insurance for themselves on new health insurance exchanges. The employer mandate was supposed to take effect Jan. 1, 2014. The Obama administration late Tuesday announced it is delaying that requirement until Jan. 1, 2015.
There may be a practical reason for the one-year delay. Larger companies have been threatening to eliminate jobs or reduce the hours of workers to avoid paying the penalties. They complained they needed more time to adjust their health care coverage and digest the regulations, and the U.S. Chamber of Commerce and other business groups praised the one-year extension. If it takes another year to get this right and ease the concerns of the business community, the delay may be for the best in the long run.
In the short run, though, the delay on the employer mandate creates more problems. If employers are off the hook for providing affordable health coverage for another year, why should individuals still be required to obtain health coverage or pay a penalty? If companies aren't paying their penalties, how will the federal government make up that revenue to help implement the law? If Washington doesn't collect the insurance information from the employers, how will it determine which workers are eligible for what subsidies when they buy insurance on the new exchanges?
The collateral damage from the delay already is apparent in Tallahassee. One of the economic arguments to prod the Florida Legislature to expand Medicaid to cover 1 million uninsured residents involves the now-delayed penalties for employers. If Florida continues to refuse to expand Medicaid, some 400,000 low-income workers who would have been covered by the Medicaid expansion could use federal subsidies to buy coverage on the exchange — and that could have triggered $147 million in penalties to their employers. Now that threat of those penalties is gone for a year.
There are still plenty of reasons why the Florida Legislature should call a special session and approve the Medicaid expansion. The state is turning its back on $51 billion in federal dollars and ignoring the needs of the uninsured. It is enabling the cost of uncompensated health care to continue to be shifted onto the backs of taxpayers, and onto the companies and workers who are paying for insurance. But the Obama administration's decision makes it even harder to persuade House Speaker Will Weatherford to do the right thing and quit blocking Medicaid expansion.
The Affordable Care Act still has many positives and should be improved rather than repealed. But the one-year delay of the employer mandate marks a failure by the Obama administration to get key details right. Now the administration is under even more pressure to smoothly set up the insurance exchanges in Florida and in other states that refused to do the work — and it can't afford another major misstep.