August 6, 2013
Health Care Reform Update: Week of August 5
CBO Says Pay or Play Delay to Increase Implementation Costs
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Health Care Reform Developments Week of August 4, 2014[1]

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Health Care Reform Developments Week of August 4, 2014[1]

  1. 1. 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 year. 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.

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