Obama Administration Delays Employer Mandate For One Year; Reaction in California

The Obama administration announced Tuesday afternoon that the federal health law's employer mandate, which requires large employers to provide health insurance to full-time workers or pay a fine, has been delayed for one year.

Other key elements of the Affordable Care Act will stay in place, such as the individual requirement to have health insurance and the new marketplaces, such as Covered California.

The administration's announcement cited "concerns about the complexity of the requirements and the need for more time to implement them effectively" as the reason for the change.

"This is a wise, sensible and pragmatic decision on the part of the administration," said Bill Kramer, executive director for national health policy at the Pacific Business Group on Health, a large employer group focused on health care. He called the reporting requirements an "administrative burden" on businesses, and said this delay "allows both the administration to simplify reporting requirements and allows employers more time to put in place their own systems to insure to insure that they can meet those reporting requirements."

Larry Levitt, senior vice president of the nonpartisan Kaiser Family Foundation, noted that the employer mandate has been one of the most controversial elements of the ACA, even though he says most Americans support the idea of employers providing health insurance to their workers. "But it's created a string of potentially negative stories and anecdotes about employers, for example, cutting back hours of part-time workers to avoid the requirement ... so it's something that had the potential to create controversy as the health reform law rolls out."

The impact of the announcement is fairly limited because more than 90 percent of large employers -- under the health law that's 50 or more full time employees -- already voluntarily provide health insurance to their workforces. Levitt said the requirement affected businesses that mostly employ lower-wage workers, such as restaurants, retail establishments and agricultural businesses. These are a minority of large businesses, he said.

A spokesman at Covered California said this change, while "certainly very interesting news," will have no impact on its mission. "As far as Covered California is concerned," said Dana Howard, "we don't see this affecting our implementation of the exchange component of the Affordable Care Act, which we have been charged to do."

Still, it's unclear how the move will be interpreted by the public. "Any change in the law at this stage," said Levitt, "when we're about three months away from open enrollment, is likely to create a certain amount of disruption."

Levitt also noted that people who might have been eligible for employer coverage under the mandate may now have to rely on marketplaces in the states where they live, such as Covered California.

Howard said such workers "can always come to Covered California" to purchase a health plan, but noted eligibility for subsidies would depend on their income.

But additional people heading to the marketplace for coverage could increase government costs if those people do get subsidies, Levitt pointed out. Alternatively, low-wage workers may be eligible for the state's expansion of Medi-Cal. The federal government is picking up 100 percent of the cost of those newly-eligible enrollees, which again will increase the government's costs, if those workers would have been covered by their employer instead.

Health advocates warn that further delays could hurt the program. “It’s really critical that this one year delay doesn’t turn into a multi-year delay, because the employer responsibility provision is very important for the long-term sustainability of our health system,” said Anthony Wright executive director of Health Access.

Small businesses that employ fewer than 50 full-time workers were never required to provide health insurance. Covered California is setting up a marketplace, called SHOP, to help these businesses provide insurance to their workers if they choose.

Mina Kim and Ryder Diaz contributed to this report.