Benefits and Compensation

CBO Says Health Reform Delays Will Cost Feds $12 Billion; 1M Fewer People to Have Coverage

The government’s costs to implement health care reform is expected to rise by $12 billion as a result of the recently announced delay in the employer mandate and information reporting requirements, according to a July 30 letter by the Congressional Budget Office and the Joint Committee on Taxation. In addition, the letter to the House Committee on the Budget noted that roughly 1 million fewer people are expected to be enrolled in employment-based coverage in 2014 than what CBO had projected earlier this year.

Background

On July 2, the Treasury Department announced that the federal government was suspending certain reform requirements that initially were scheduled to begin in January 2014: (1) employer reporting about coverage offered to workers; and (2) a play-or-pay mandate, which will require employers that employ 50 or more workers to offer health coverage to workers or pay a penalty. An official announcement on transition relief for employers from the reporting requirements and the play-or-pay mandate delay was issued July 9 in Notice 2013-45.

Subsequently, the administration announced that through 2014, state-run health insurance exchanges need not perform complete eligibility verifications on all individuals applying for federal premium tax credits, under final rules published July 15 from the U.S. Department of Health and Human Services. This means that HHS will not conduct follow-up verification on behalf of the exchanges until Jan. 1, 2015, one year later than expected.

CBO’s Updated Estimates

In May 2013 baseline projections, CBO had projected that the insurance coverage provisions of the reform law would have a net cost to the federal government of $1.36 trillion over the 10-year period from 2014 to 2023. However, CBO expects the delayed requirements will result in a higher estimated net cost of $1.3 trillion — $13 billion more than previously estimated. That amount represents a $10 billion reduction in 2014 employer penalties (that would have been collected in 2015), and a $3 billion increase in exchange subsidies. However, CBO and JCT stated this will be offset by $1 billion due to “other small changes,” including an increase in taxable compensation resulting from fewer people enrolling in employment-based coverage. This will result in a net cost increase of $12 billion.

Finally, CBO and JCT noted that, as a result of the delay and the new final rules, roughly 1 million fewer people are expected to be enrolled in employment-based coverage in 2014 than the number projected in CBO’s May 2013 baseline. This is primarily because of the one-year delay in employer penalties. CBO and JCT expect that roughly half of the individuals will be uninsured and the others will obtain coverage through the exchanges or will enroll in Medicaid or the Children’s Health Insurance Program. “In particular, fewer than half a million additional people are expected to be uninsured in 2014 than the number projected in the May baseline,” according to the letter.

More details on this issue can be found at http://hrcomplianceexpert.com.

Leave a Reply

Your email address will not be published. Required fields are marked *