Delay of U.S. Health law Mandate to Cost $12 Billion

President Barack Obama’s decision to give employers a year before they’re required to provide health insurance for workers will cost taxpayers $12 billion, the Congressional Budget Office said.

The health law will now cost $1.375 trillion through 2023, an increase of $12 billion since May, the CBO said in a letter to members of Congress. The government will lose $10 billion in penalties that companies would have paid next year for not providing employee health plans, and taxpayers will spend $3 billion more on subsidies for workers who instead will buy coverage in new marketplaces called exchanges.

The White House announced the delay on July 2, in response to a lobbying effort from business groups. The Affordable Care Act requires companies with 50 or more workers to offer health insurance to their workers or pay fines of as much as $3,000 per employee if they don’t. Now, companies don’t have to provide coverage until 2015.

“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,” Douglas Elmendorf, the director of the CBO, wrote in the letter.

The costs of the delay were offset by about $1 billion because of “small changes,” CBO said, including an increase in income tax collections from people who don’t get coverage at work. The value of employer-provided health insurance isn’t taxed, while workers who get higher pay to buy insurance on their own would have to pay income tax on that compensation.

Even with the mandate’s delay, the health law is projected to reduce the deficit, the CBO said, because of lower Medicare spending and other provisions that offset the cost of new coverage. The CBO said May 15 that repealing the law would cost the federal government $109 billion, a figure it didn’t update today.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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