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CBO Says Mandate Delay Will Cost the Federal Government $12 Billion over 10 Years

By John Reichard, CQ HealthBeat Editor

July 29, 2013 -- The Obama administration's recent announcement that it will delay by one year the health care law's employer coverage mandate will add $12 billion over 10 years to the federal tab for insurance coverage provisions of the overhaul, according to a new analysis by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT).

Those costs will rise to $1.375 trillion, up from $1.363 trillion, from 2014 to 2023, the analysis said. Costs for subsidies to buy coverage in insurance exchanges will rise $3 billion over that period. At the same time, the government will collect $10 billion less in penalty payments.

"Other small changes, including an increase in taxable compensation resulting from fewer people enrolling in employment-based coverage, will offset those increases by about $1 billion, CBO and JCT estimate," CBO said in a July 30 letter to House Budget Committee Chairman Paul D. Ryan, R-Wis.

Because of the delay, roughly 1 million fewer people are expected to be enrolled in employment-based coverage in 2014, the analysis said. A portion of that group – fewer than a half million additional people – are are expected to be uninsured, with the other portion getting subsidized coverage in exchanges or in Medicaid or the Children's Health Insurance Program.

The letter added that "CBO and JCT expect that some large employers that would have offered health insurance coverage to their employees in 2014 will no longer do so as a result of the one-year delay of penalties for those that do not offer affordable coverage. However, most large employers currently offer health insurance coverage to their employees, and because the delay is only for one year, CBO and JCT expect that few employers will change their decisions about offering such coverage."

The delay caused a furor among congressional Republicans, with predictions that it could lead to big increases in subsidy payouts. Although the estimate says that is not the case, the delay does add $12 billion to the federal tab, which is likely to fuel further controversy and Republican complaints that the Obama administration lacked legal authority to act on its own to make the change.

The letter also addressed the issue of how carefully exchanges will check to verify that subsidy payments to buy coverage are justified for insurance buyers.

"As a result of the temporarily looser procedures for verifying offers of employment-based coverage, CBO and JCT expect that some additional workers with affordable offers from their employer will obtain subsidized coverage through exchanges in 2014," the letter says. Employees that get offers of affordable coverage do not qualify for subsidies under the health care law (PL 111-148, PL 111-152).

"However, applicants for subsidies will still have to provide exchanges with information about how to contact their employer and will have to sign a statement indicating that their answers are accurate to the best of their knowledge; moreover, employers will be notified of employees who qualify for premium tax credits.

Consequently, although CBO and JCT expect that the verification process will have significant effects on people's behavior in coming years, the temporary loosening of verification procedures in 2014 is estimated to have only a small effect."

CBO and JCT also said they expect changes in procedures in verifying income stemming from the delay will only have a slight impact on the number of enrollees in the exchanges and on the accuracy of their income Reporting "because the Internal Revenue Service will be able to identify misreporting when it compares reported income with tax returns at year-end."

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