The Obama Administration Punts On Another Key ACA Provision

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The Treasury Department announced late Tuesday that it will delay imposition of penalties on large employers who do not provide comprehensive insurance for their employees.

“The Administration is announcing that it will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin,” Mark J. Mazur, assistant secretary for tax policy, wrote in a blog post on Treasury’s website.

The development carries too many implications to count. Politically, the administration is now vulnerable to claims that it is again delaying unpopular provisions of the law until after an important election. It’s also reinforcing the notion, propounded by the law’s opponents, that the whole thing is an unworkable mess that needs to be repealed.

But the largest implications are substantive.Back in 2012, CBO estimated that the employer penalty would reduce the deficit by about $4 billion in fiscal year 2014. But by zeroing out the penalty, the administration will not only forfeit the revenue it would have collected, but it will have removed an incentive for employers to provide coverage themselves. That probably means more workers than expected will land in the exchanges, many of whom will receive subsidies to purchase insurance themselves, which will increase spending under the law and diminish its deficit reducing potential.

Workers who aren’t eligible for subsidies will be expected to pay for their premiums entirely out of pocket.

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