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Delay in Health Care Law Mandate Will Cost $12 Billion, Affect 1 Million Workers

Congressional Budget Office issues report (July 30)

The recently announced 1-year delay in the imposition of certain penalties and requirements under the Patient Protection and Affordable Care Act (PPACA) will raise the 10-year costs of its health insurance coverage provisions by an estimated $12 billion, according to a new report from the Congressional Budget Office (CBO).

Under the PPACA, certain large employers that do not offer health insurance coverage that meets the affordability standard defined in the law will be subject to penalties. In addition, insurers and certain other health coverage providers (primarily employers that self-insure) will be required to report the names of those receiving coverage, and certain large employers will be required to report on the health insurance coverage offered to their full-time employees.

On July 2, 2013, the Obama administration announced its decision to delay for 1 year the penalties for certain large employers that do not provide affordable coverage, as well as to delay reporting requirements for insurers and employers.

In May 2013, the CBO projected that the insurance coverage provisions of the PPACA would have a net cost to the federal government of $1,363 billion over the 10-year period from 2014 to 2023. As a result of the Administration’s announcement and recently issued final rules, the net cost is now estimated to be $1,375 billion — $12 billion more than previously estimated. The largest change is a $10 billion reduction in penalty payments by employers that would have been collected in 2015. In addition, costs for exchange subsidies are expected to increase by $3 billion.

All told, as a result of the announced changes and new final rules, roughly 1 million fewer people are expected to be enrolled in employment-based coverage in 2014 than the number projected in the CBO’s May 2013 baseline, primarily because of the 1-year delay in penalties on employers. Of those who would otherwise have obtained employment-based coverage, roughly half will be uninsured, and the others will obtain coverage through the exchanges or will enroll in Medicaid or the Children’s Health Insurance Program (CHIP), the CBO estimates. In particular, fewer than half a million additional people are expected to be uninsured in 2014 than the number projected in May.

Source: CBO; July 30, 2013.

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