August 6, 2013
Health Care Reform Update: Week of August 5
CBO Says Pay or Play Delay to Increase Implementation Costs
According to the Congressional Budget Office (CBO), the decision to delay the employer pay or play
penalty by one year (from 2014 to 2015) will add $12 billion to the health care reform law’s
implementation costs. The CBO’s previous cost estimate was $1,363 billion over the 10-year period
from 2014 to 2023. As a result of the delay and implementation of the health care reform law’s
insurance coverage provisions, the net cost is now estimated to be $1,375 billion.
According to the CBO’s report, which can be accessed here, the largest change is a $10 billion
reduction in penalty payments by employers that would have been collected in 2015. (Pay or play
penalties assessed for 2014 would have been collected in 2015.) In addition to the loss of revenue
from penalty payments, there may be budgetary effects due to changes in how many people will
obtain insurance coverage and from what source. The CBO expects that some large employers that
would have offered health insurance coverage to their employees in 2014 to avoid the pay or play
penalties will no longer do so as a result of the one-year delay. However, it expects that few
employers will actually change their decisions about offering coverage since most large employers
currently offer health insurance coverage to their employees and because the delay is only for one
Costs for exchange subsidies (premium tax credits that are available to individuals purchasing
coverage through public exchanges) are expected to increase by $3 billion. The CBO expects that
additional workers will obtain subsidized coverage through the public exchanges in 2014 than would
have otherwise been eligible because the procedures for verifying offers of employment-based
coverage will be temporarily looser. The Department of Health and Human Services (HHS) has
announced that it would delay for one year (until 2015) conducting, on behalf of state-based
exchanges, any follow-up verification of the information provided by applicants for premium tax
credits. During 2014, state-based exchanges will be permitted to accept “self-attestations” from
applicants for premium tax credits.
The CBO now expects that because of the pay or play delay and other changes, about 1 million fewer
people are expected to be enrolled in employment-based coverage in 2014 than the number the CBO
previously projected. Of those who would otherwise have obtained employment-based coverage, the
CBO estimates that 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.
This information is not intended to represent legal or tax advice and has been prepared solely for informational
purposes. You may wish to consult your attorney or tax adviser regarding issues raised in this publication.