On July 30, 2013, the Congressional Budget Office (“CBO”) and the Joint Committee on Taxation (“JCT”) raised their estimate of the 10-year net cost of the health insurance coverage provisions under the Affordable Care Act (“ACA”) by $12 billion to $1,375 billion. At the request of Congressman Paul Ryan, Chairman of the House Budget Committee, the CBO and JCT reassessed their prior projections in light of the Administration’s decision earlier this month to delay for one year the imposition of the “employer mandate” penalties and mandatory reporting requirements for insurers and employers under the ACA that were scheduled to go into effect on January 1, 2014.
Under the employer shared responsibility provisions of the ACA, employers with fifty or more full-time employees that do not offer affordable health insurance coverage to their employees will be subject to annual penalties. These penalties were expected to yield $10 billion from fines assessed in 2014 – which will not be realized due to the one-year implementation delay. The remainder of the increase in the projections comes from the expected hikes in exchange subsidies arising from the delay after taking account of expected cost savings due to higher taxable income levels resulting from fewer employees enrolling in employer-sponsored health insurance.
In addition to anticipated lost revenue, the delay also means that fewer people are likely to have health insurance. The CBO and JCT estimate that 500,000 people will go uninsured in 2014 because of the delay in the implementation of these ACA provisions. This estimate is based on the assumption that half of the likely one million employees who will be unable to obtain health insurance through their employers because of the delay will obtain coverage through the health insurance exchanges (that are still scheduled to go live in January), Medicaid or the CHIP program, while the other half will go without coverage altogether.
Despite these estimates, the CBO and JCT expect few large employers to change their health insurance coverage for 2014 because of the delay in the employer mandate. Similarly, they believe that loosening of the temporary verification procedures that is required because of the delay in the reporting requirements will have a “small effect”. While the CBO and JCT did not assess the impact of a permanent delay in the implementation of the mandate penalties and reporting requirements in their analysis, they concluded that it would have a larger financial impact than the current one-year delay. However, they did not elaborate on the magnitude of the costs of a permanent suspension of these provisions of the ACA.