The Obama Administration has said it will not require employers to provide health insurance for their workers until 2015, delaying a key provision of President Barack Obama's healthcare reform law by a year, to beyond the next election.
The move raised questions about the future of other provisions of the law, including the mandate for individuals to obtain health coverage in 2014, and followed widespread complaints from businesses and their lobbyists about reporting requirements for employers with 50 or more full-time workers.
Retailers and other business interests welcomed the change, which analysts said could stymie a main avenue of attack on Obama's signature domestic policy achievement as campaigning for the 2014 midterm congressional election gets under way later this year.
Republicans called it evidence that Obama's plan was a failure, while Democrats termed it a demonstration of flexibility.
Whether that flexibility opens the door to further changes in the healthcare law is now a matter of debate. The law, known as "Obamacare," was passed in 2010 and upheld by the U.S. Supreme Court a year ago.
"If this is negotiable, it seems like anything is negotiable," said Malcolm Slee, a tax lawyer working with businesses on healthcare implementation.
Companies would have had to pay the Internal Revenue Service $2,000 for each full-time employee who did not get health coverage, beginning Jan. 1, when the Patient Protection and Affordable Care Act is scheduled to come into full effect.
"This is designed to meet two goals," Mark Mazur, the Treasury Department's assistant secretary for tax policy, said in a government blog. "It will allow us to consider ways to simplify the new reporting requirements consistent with the 2010 law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible."
He said the administration would publish formal guidance describing the changes within the next week.
Edward Lenz, senior counsel of the American Staffing Association, an employment and recruiting industry group, said administration officials briefed his organization on Tuesday afternoon, portraying the delay as a "practice year" for businesses.
"In our conversation this afternoon with representatives from the administration, they are expecting employers to voluntarily go forward with these rules," he said.
Trade groups representing retailers and restaurants, among those expected to be hit hardest by the mandate, welcomed the one-year extension.
"We commend the Administration's wise move," said National Retail Federation Vice President Neil Trautwein. "This one-year delay will provide employers and businesses more time to update their healthcare coverage without threat of arbitrary punishment."
Some analysts saw the change as a responsible move to accommodate smaller businesses. It could also help the public education campaign to persuade the uninsured to sign up for coverage.
"It takes away one of the potential sources of criticism and frankly negative stories that were likely to materialize in the fall," said Larry Levitt of the nonpartisan Kaiser Family Foundation, which tracks healthcare issues.
Republican lawmakers seized on the announcement as evidence the healthcare reform they have repeatedly sought to repeal represented a flawed administration policy.
House of Representatives Speaker John Boehner said the administration should now provide relief to individuals who face a penalty if they do not obtain health coverage by 2014. The so-called individual mandate will begin next year at $95, or 1 percent of taxable household income and rise in phases to $695 per person, with a cap of 2.5 percent of household income, by 2016.
"This is a clear acknowledgment that the law is unworkable, and it underscores the need to repeal the law and replace it with effective, patient-centered reforms," Boehner said in a statement.
But Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid, said the change would help make Obamacare as beneficial as possible by allowing the administration to work with business stakeholders. "It is better to do this right than fast," he said.
The administration has already delayed insurance offerings for small businesses that were to be made available through new online exchanges. A recent report by the watchdog Government Accountability Office also called into question whether new insurance marketplaces for millions of individuals would meet an Oct. 1 deadline for open enrollment.
The importance of the decision contrasted with how it was announced: through two low-key blog posts on Tuesday evening, one on the website of the Treasury Department and the other at Whitehouse.gov at a time when Obama was traveling and Congress was in recess for the Fourth of July holiday.
Valerie Jarrett, a senior adviser to Obama, said in a separate blog post on Monday that the government was fully prepared to open the new insurance exchanges for individuals in October. While the nation's largest employers already offer extensive health benefits to their full-time employees, many small and mid-sized companies will now be required to provide insurance for the first time.
Tuesday's delay also raised questions about initial funding for Obamacare. The employer mandate is expected to raise $140 billion in revenues over the next 10 years, according to the nonpartisan Congressional Budget Office. The CBO estimates the individual mandate will bring in a further $45 billion.
"It does undermine some of the funding," said Julie Barnes of the healthcare consulting firm Breakaway Policy.
The CBO forecast in May that the employer mandate would generate about $10 billion in revenue for federal fiscal year beginning Oct. 1, 2014, rising to $20 billion a year in 2023. (Additional reporting by Alina Selyukh, Patrick Temple-West, Toni Clarke, Fred Barbash and Thomas Ferraro in Washington, by Jessica Wohl in Chicago and Martinne Geller in New York,; Editing by Peter Henderson, Prudence Crowther and Peter Cooney)