Massachusetts employers, which are required to pay a penalty if they fail to provide health insurance for their workers, are likely to get an 18-month reprieve from the mandate, a central piece of the state’s first-in-the nation health care law.
The state budget awaiting Governor Deval Patrick’s signature would repeal the penalty to clear the way for a similar provision in the federal Affordable Care Act that was set to take effect in January. But the Obama administration announced Tuesday that it would delay the employer penalties in the national law until 2015, citing the complexity of the program.
Patrick said Tuesday that he was still considering whether to take action to extend the state penalty but was likely to move ahead with the repeal.
“We’re going to look at that,” he said. “The point is we’re going to be ready when the federal government is ready.”
A spokesman later said in an e-mail that employers in Massachusetts, where there is near-universal coverage, already are more likely than those in other states to offer health insurance and the delay in the federal law’s penalties was unlikely to change that.
The wait may make little difference in the lives of most people. In Massachusetts, employers will have little incentive to drop coverage only to have to buy it again months later, business leaders said. And nationally, more Americans will have an opportunity to buy insurance from state exchanges this fall if their employer doesn’t provide coverage.
But some advocates for the landmark federal law say they are concerned that political pressure is eroding the Affordable Care Act’s framework and that the employer penalty could face further challenges.
Rob Restuccia, director of Community Catalyst, a national consumer advocacy group for health reform based in Boston, said he was puzzled by the delay, announced during a holiday week when Congress is on recess.
“In Massachusetts we implemented something that’s relatively complicated, that’s not that different, and that was fairly effective, so why the administration did this is really not clear to me,” he said.
The Massachusetts mandate, referred to as the “fair share employer contribution,” was a key part of the 2006 law, meant to prevent businesses from dropping insurance plans and swelling the rolls of people receiving subsidized plans or charity care.
Then-governor Mitt Romney vetoed the provision but was overridden by a Democrat-dominated Legislature. Under the law, businesses with more than 10 employees that do not provide adequate coverage are fined $295 per employee.
Employer coverage has held about steady in the years since its passage. In 2011, about 62 percent of Massachusetts residents had insurance through their employer, according to a state survey released in January. The report attributed a small drop in that rate in 2010 and 2011 to the recession.
The absence of an employer penalty may do little to change that rate, said Richard Lord, president of Associated Industries of Massachusetts. Many businesses see health insurance as an important recruiting tool, he said.
Business groups had lobbied the Legislature last year to change the state penalty, seen by some as overly onerous. Ultimately, Lord said, his group worked with the Patrick administration to repeal the state penalty altogether because the federal one, affecting businesses with more than 50 employees at a cost of between $2,000 and $3,000 per full-time employee, was imminent.
“We didn’t want to have overlapping penalties,” he said.
Amy Whitcomb Slemmer, executive director of the Massachusetts consumer group Health Care for All, wrote a letter to Patrick Wednesday urging him to put the state provision into effect once more.
“We are very concerned that this delay in Washington could be extended,” she said in an interview. “We very much want to stick with the formula that has worked thus far in Massachusetts, where everyone is contributing something.”
Obama administration officials have characterized the federal delay as a simple effort to “cut red tape” in response to small businesses that complained about the complexity of the law and threatened to lay off workers or cut their hours so they would not be subject to the penalty.
The move also could benefit Democrats representing swing districts in the run-up to the 2014 midterm elections, by appeasing businesses.
The delay illustrates the administration’s “flexibility and thoughtfulness” in implementing the new law, said Representative Michael E. Capuano, a Massachusetts Democrat. “I’d rather have it done right than done quickly.”
But Republican critics seized upon the delay to attack the law Wednesday. Tea Party groups saw it as evidence that the law is a “train wreck.”
Senator Lamar Alexander, a Tennessee Republican and ranking member of the Senate Health, Education, Labor and Pensions Committee, said the delay is a sign of “Obamacare unraveling.”
“Pushing the implementation of the employer mandate until after the 2014 election confirms the law was an historic mistake,” he said.
The administration lately has encountered hurdles publicizing the law. Republicans, who have blocked funding for outreach and enrollment, recently pressured the National Football League and other major sports leagues to distance themselves from promoting the law’s benefits, like the Boston Red Sox did in Massachusetts. The team was instrumental in getting young uninsured fans to sign up for coverage under the 2006 law.
Republican lawmakers and governors in more than a dozen states are considering laws to make it harder for so-called “navigators” to educate and enroll the uninsured. Other bumps include a one-year delay in requiring that insurers adhere to a $6,350 out-of-pocket limit for individuals, as well as a delay in providing small business workers a choice in health plans.
The administration has yet to issue regulations on the law’s requirement that prohibits employers from offering more robust health benefits to executives than to average workers. Nor has it implemented a provision requiring businesses with more than 200 workers to automatically enroll them in health insurance.
Postponing the employer mandate will cost the government an estimated $5 billion that businesses were expected to pay in penalties next year.