WEDNESDAY, July 3, 2013 (HealthDay News) -- In a surprise announcement, the Obama administration said Tuesday evening that it was delaying implementation of a key part of its landmark health-reform law -- the requirement that employers with more than 50 workers offer insurance coverage by Jan. 1, 2014 or face fines.

The new deadline for providing such coverage is now Jan. 1, 2015, administration officials announced on blog postings.

Administration officials said the delay was prompted by concerns from business leaders that the reporting system needed to carry out the coverage mandate was complex and made it difficult to meet the Jan. 1, 2014 deadline.

"We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively. We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so," Mark Mazur, assistant secretary for tax policy at the Treasury Department, wrote in a blog posting.

Business groups had complained that the employee coverage provision was too complicated and welcomed the delay in its implementation.

There was no advance indication of the Obama administration's decision, which came as a "pleasant surprise," Randy Johnson, senior vice president of the U.S. Chamber of Commerce, told the Associated Press.

Neil Trautwein, a vice president of the National Retail Federation, said, "We commend the administration's wise move. It will provide employers and businesses more time to update their health care coverage without threat of arbitrary punishment."

Helen Darling, president and CEO of the National Business Group on Health, called the delay "terrific news for large employers." It buys time to make needed changes to health-benefits programs and provides relief from reporting requirements and compliance with complex rules, she said in a statement.

Under the employer provision, companies with 50 or more workers must provide affordable coverage to all full-time employees or face the risk of escalating tax penalties. The requirement was expected to have the largest impact on major chain hotels, restaurants and retail stores, the AP said.

Some companies with payrolls near the 50-worker cutoff point said they would consider eliminating jobs or switching some full-time workers to part-time status to avoid having to offer insurance coverage, The New York Times reported.

Several observers speculated that the delay could threaten the ultimate goal of the 2010 Affordable Care Act -- to offer insurance coverage to an estimated 30 million Americans who currently don't have it.

"I am utterly astounded," Sara Rosenbaum, a professor of health law and policy at George Washington University and a supporter of the law, told the Times. "It boggles the mind. This step could significantly reduce the number of uninsured people who will gain coverage in 2014."

The hospital industry deemed the announcement "troubling" for people who will not get job-based coverage next year. "The goal of the ACA [Affordable Care Act] was to extend coverage to the uninsured, which required a shared responsibility from all stakeholders," Rich Umbdenstock, president and CEO of the American Hospital Association, said in a statement. "We are concerned that the delay further erodes the coverage that was envisioned as part of the ACA," he said.

Valerie Jarrett, a senior advisor to President Barack Obama, sought to downplay such concerns. "We are full-steam ahead for the marketplaces opening on October 1," she wrote on her White House blog Tuesday evening.

The marketplaces Jarrett referred to are another key component of the Affordable Care Act -- so-called health insurance exchanges where consumers can purchase coverage.

The state-based insurance exchanges are supposed to operate a website where uninsured residents of the state and small employers can compare various health-plan options offered by insurance companies, much in the same way that consumers shop online for hotel rooms and airplane tickets that suit them best.

Tuesday's announcement of the delay in implementing employer insurance coverage does not affect the central provision of the Affordable Care Act -- that most Americans carry health insurance or face a fine in the form of a tax penalty. This so-called "individual mandate" was upheld as constitutional last year by the U.S. Supreme Court.

Caroline Pearson, vice president of the Washington, D.C.-based consulting firm Avalere Health, told HealthDay that she doesn't think the delay will have a "material impact" on insurance coverage next year. "I think really this is the administration politically trying to show flexibility to employers who were expressing concerns about the reporting requirements," she explained.

Kosali Simon, a professor in the School of Public Health and Environmental Affairs at Indiana University in Bloomington, agreed. "In the long run, a year of a delay is not a really big deal," she said.

More information

To learn more about the Affordable Care Act visit the U.S. Department of Health and Human Services.

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