Wall Street Journal
When Obama administration officials delayed a central plank of the new health law—requiring that big employers offer health insurance to workers — they said it was to help businesses pleading for more time.
Left unsaid was the federal government hadn’t written key rules guiding employers, according to current and former administration officials, and computer systems that were supposed to run the program weren’t operational.
The delay has opened the door for critics and allies alike who are now raising questions about the administration’s ability to implement the biggest domestic policy initiative in a generation.
The stakes are now higher for the rollout of the law’s centerpiece—new, government-run exchanges where individuals can shop for private insurance. That is a bigger logistical and technological challenge. The government’s computer systems are being tested now, but computer experts say there is no way to know how well they will work ahead of the Oct. 1 launch.
The employer mandate is one way the new law tries to stitch together a health-care system that brings the U.S. closer to universal insurance coverage.
Most Americans now get coverage from an employer, but policy makers feared businesses would drop coverage once other options were available.
That would mean more workers claiming government subsidies, raising the cost of the new program.
The sickest are also the most likely to seek coverage through the new government-run exchanges, making it hard for insurers to keep down premiums without a similar influx of healthier customers.
Some conservatives argue the Obama administration delayed the employer mandate to avoid a political mess during the 2014 midterm elections.
Others say the political damage today is greater: Republicans have called for a delay of the entire law, including the requirement that individuals carry insurance.
“We agree with you that the burden was overwhelming for employers, but we also believe American families need the same relief,” House Speaker John Boehner and other top Republicans said in a letter Tuesday to President Barack Obama.
GOP leaders promised votes to write into law the one-year delay for employers and offer the same delay to individuals.
White House Press Secretary Jay Carney said Tuesday the individual mandate would take effect as planned.
An administration official said Tuesday the Treasury Department delayed the employer mandate after it became clear the agency couldn’t address concerns raised by employers in time.
He said the agency was having a tough time finding solutions that weren’t a burden.
The official said the delay was caused, in part, by limited staffing and the wait for results of the Supreme Court’s review. He said the administration slowed its work until after the court ruled the law constitutional last year.
In announcing the employer mandate delay last week, the White House portrayed the decision as accommodating business. “In our ongoing discussions with businesses we have heard that you need the time to get this right. We are listening,” senior adviser Valerie Jarrett wrote in a blog post.
Business groups and corporate leaders praised the decision when it was announced.
To bolster the private health-insurance system, which relies chiefly on employers, the law requires businesses with more than 50 workers to offer coverage to employees who work more than 30 hours per week.
The majority of these companies already do; the 4% or so that don’t face fines of $2,000 per employee, a penalty designed to discourage them from dropping or cutting coverage.
The requirement had already prompted some companies to act in ways the law didn’t intend, such as threatening or moving to cut some worker schedules to less than 30 hours a week.
And some firms have calculated that it would be cheaper to pay a fine than set up an insurance plan.
To comply with the law, companies needed rules for reporting data to the government each month, including the names and Social Security numbers of anyone who worked full-time for at least one month during the year, plus information on the insurance offered and its price.
They have to calculate and report, based on individual worker incomes, whether the premiums offered are affordable.
Among the questions the administration hadn’t answered in time: Should companies be required to report month-by-month details about who they employed? Should employers who already offer insurance be subject to the same rules? What happens if workers say they weren’t offered adequate insurance but employers say they were?
To make it all work, businesses and the Internal Revenue Service, which is in charge of handling this element of the law, needed new computer systems, which couldn’t be built before the rules were written.
The IRS has promised to issue regulations answering these questions.
The Treasury Department said last week the regulations would arrive this summer.
In February, the administration told officials at the U.S. Chamber of Commerce, the business lobby group, that draft rules detailing the reporting requirements for employers were coming out “any day.” They have yet to see them, said Katie Mahoney, the executive director for health policy at the chamber.
The delay made it difficult for business to develop the computer programs needed to comply, said Catherine Livingston, a former health care counsel at the IRS, who is now in private practice.
“They were so late putting out regulations, and even as of today they have not produced proposed regulations, they knew it was not realistic to expect employers and insurers to implement their system changes,” she said.
Businesses have long made the same argument. “There are just so many unknowns right now,” said Tom Boucher, the owner of Great New Hampshire Restaurants Inc., who flagged concerns earlier this year. “We’re right up against this deadline of trying to comply with the mandate and we’re very happy the administration postponed it for another year. It’s a very complicated rule for business.”
The company has 500 employees and operates eight restaurants in New Hampshire.
One potential wrinkle, according to some legal experts, is that delaying the employer mandate could violate the law, which specifically directs that the provision begin after 2013.
An administration official said the law offers that flexibility.
The mandate isn’t the only part of the law that has run into problems.
After the Supreme Court ruling, several GOP-led states opted against expanding Medicaid rolls, which will likely leave more people uninsured than anticipated.
In addition, the federal government was forced to take on a larger role in running the insurance exchanges after all but 14 states and Washington, D.C., declined to fully set them up on their own.
The next big test is implementation of the exchanges, where people can shop for coverage on Oct. 1.
It also said it would, at least initially, trust people applying for subsidies to honestly report their income because verification systems might not be ready.
Last month, the Government Accountability Office said “several key tasks” for building the exchanges were still incomplete, which experts said were needed to finish computer systems.
“From a technology perspective there are too many complex things that need to be completed and there’s not enough time,” said Dan Schuyler, a director at the consulting firm Leavitt Partners and a former director of technology for Utah’s health insurance exchange.
The exchanges have been compared with travel websites, which allow consumers to compare prices and buy tickets.
But health sites have a bigger task. They must determine whether buyers are eligible to participate and whether they qualify for a government subsidy.
The sites also must interact with dozens of insurance companies that are expected to offer plans through the exchanges—as well as connect with the Social Security Administration and the Department of Homeland Security to certify U.S. citizenship or legal residency.
Joanne Peters, of the Department of Health and Human Services, said the department was “on track” to open the exchanges as scheduled.