CBO: Federal Gov’t Will Lose $12B From Employer Mandate Delay

The Obama administration's decision to delay the Affordable Care Act's employer coverage mandate by one year will cost the federal government about $12 billion in lost tax revenue and other costs over the next 10 years, according to a Congressional Budget Office analysis released Tuesday, The Hill's "Healthwatch" reports (Baker [1], "Healthwatch," The Hill, 7/30).

Under the ACA, businesses with at least 50 workers beginning in 2014 must pay a penalty of $2,000 per employee if they do not provide affordable coverage to their employees. Employers will not be required to pay for the first 30 workers who are included in the penalty calculation (California Healthline, 7/3).

Details of CBO Findings

In a letter accompanying the analysis, CBO Director Douglas Elmendorf said the delay would result in a loss of about $10 billion -- the bulk of the lost revenue -- from penalties that some employers would have had to pay for violating the mandate. The penalties would have been assessed in 2014 and collected in 2015. The letter was sent to several congressional lawmakers, including House Budget Committee Chair Paul Ryan (R-Wis.), who requested the analysis (Corbett Dooren, Wall Street Journal, 7/30).

The letter also noted that the implementation delay would cause about one million fewer U.S. residents to have employer-sponsored coverage in 2014, compared with previous projections (Baker [1], "Healthwatch," The Hill, 7/30). About 50% of those individuals will remain uninsured, while others will obtain coverage through Medicaid, CHIP and the insurance exchanges, which CBO estimated will increase the cost of subsidies by $3 billion.

However, CBO analysts reported that the cost would be offset by $1 billion from other changes, such as an increase in taxable compensation that would result from fewer individuals enrolling in employer-based coverage (Kliff, "Wonkblog," Washington Post, 7/30).

Further, the delay would raise the cost of the ACA's insurance coverage provisions over the next decade, according to analysts. They estimated that the net cost of those provisions would be about $1.38 trillion over the next 10 years, up from its May baseline projection of about $1.36 trillion over same period, Reuters reports (Morgan, Reuters, 7/30).

Overall, CBO said the ACA would have a positive effect on the federal deficit, in part because of a reduction in Medicare spending, the Wall Street Journal reports (Wall Street Journal, 7/30).

CBO Unsure About Cost Effect of IRS Ban Proposal

Meanwhile, CBO on Tuesday announced that it has not completed a cost estimate for a bill (HR 2009) that would block the Internal Revenue Service from implementing the ACA, The Hill's "Healthwatch" reports.

According to "Healthwatch," barring the IRS from implementing the ACA would impede the Obama administration's ability to issue tax credits that would help some low-income individuals offset the cost of purchasing health plans through the insurance exchanges.

The IRS has said the government would save money if it was not able to provide the subsidies, but that it would not be able to collect incorrect credits claimed through regular tax filings. In addition, the agency would not be able to collect penalties from individuals who fail to obtain coverage under the law, as well as, new taxes on insurance plans and medical devices.

CBO analysts said they are not sure how the House bill would affect the deficit (Baker [2], "Healthwatch," The Hill, 7/30).