Delay in health-care law could hamper its enforcement

WASHINGTON -- There's a bit of a domino effect undercutting President Barack Obama's health-care law.

Enforcement of the overhaul's central mandate -- that individual Americans must have coverage -- could be weakened by the Obama administration's recent delay of a requirement that larger employers provide medical insurance.

That's because the delayed rule also required companies to report health insurance details for employees. Without employers validating who's covered, a scofflaw could lie, and the government would have no easy way to check.

The Treasury Department said Tuesday it expects any impact to be minor because most people will not risk telling the government a lie. Still, it's another incentive for uninsured people to ignore a new government requirement that for many will cost hundreds of dollars.

"If Americans begin to figure out that the individual requirement is toothless for 2014, ... younger, healthier uninsured people will stay away in droves," said Edward Fensholt, director of compliance services for the Lockton Cos., a benefits consulting firm that advises employers.

With fewer healthy people in the pool, premiums in new health insurance markets this fall could rise.

The latest twist emerged a day before votes in the Republican-led U.S. House to delay both the individual and employer mandates. The House measures, which have little chance of advancing in the Senate, are the latest in a series of Republican attempts to repeal or defund "Obamacare."

The administration declined to address the new enforcement concerns on the record.

Instead, a senior Treasury official, commenting on condition of anonymity, said it's only a hypothetical problem and the administration does not believe a significant number of people will choose to flout the law. After all, most Americans truthfully report their annual income to the Internal Revenue Service, said the official, who spoke only on condition of anonymity because the official was not authorized to comment publicly by name. However, most people know the IRS already has the income information from their employers on W-2 forms.

Coverage for the uninsured through President Barack Obama's health-care law starts next Jan. 1. Under the Affordable Care Act, middle-class people with no access to job-based health insurance will be able to buy subsidized private coverage through new online markets, opening for enrollment Oct. 1. Low-income people will be steered to an expanded version of Medicaid, in states accepting it.

The individual requirement that most Americans carry health insurance also takes effect in 2014. At the same time, insurers no longer will be allowed to turn away people in poor health, or charge them more.

The individual mandate survived a Supreme Court challenge last year when a narrow majority ruled that fines used to enforce it can be considered a tax, meaning the requirement falls within the power of Congress to levy taxes.

The employer mandate applies to larger companies with 50 or more workers. Under the law, they can be fined for not offering affordable coverage. Last month, the White House unexpectedly delayed the employer requirement for a year, until 2015. The White House said more time was needed to work out complicated reporting requirements so they do not become a burden to businesses.

Since more than nine in 10 companies affected by the employer mandate already provide coverage, it was never designed to get large numbers of uninsured people covered. Instead, lawmakers meant it to keep employers from dropping coverage and shifting responsibility to the government.

The individual requirement, however, always was seen as a linchpin of the law. Although exceptions exist for financial hardship and other circumstances, most individuals risk fines starting next year if they remain uninsured. Those penalties start small -- as little as $95 in 2014 -- but they increase in the years after.

In announcing the delay of the employer requirement, the administration underscored the importance of the individual mandate by saying it would remain in full force for 2014. The White House dismissed as political posturing a demand by House Speaker John Boehner for a similar one-year delay in the individual mandate.

Largely ignored, however, was the enforcement link between the two mandates. The IRS, which will police both the individual and employer requirements, was to receive the now-delayed coverage reports from employers and use those to check compliance by individuals. Now that won't be as easy.

"It may mean that enforcement is light in 2014," said Neil Trautwein, the top health-care policy expert for the National Retail Federation. "It illustrates the interconnectedness of the law, and the difficulty [administration officials] have in making all the pieces work, and work on schedule."

The Treasury official who spoke on condition of anonymity said individuals still will have to tell the IRS on their returns for 2014 whether they had health insurance. Taxpayers will know themselves, so they will have all the information they need to comply. It won't be a gray area, said the official, and cheaters risk a perjury charge. Enforcement will get tighter over the years.

A prominent defender of the health-care law, Washington and Lee University law professor Timothy Jost, acknowledged the delay will make it more difficult for authorities to identify people who claim to be insured when in fact they aren't.

"It's going to be like much of the rest of our tax system," said Jost. "People are supposed to be honest, and there are criminal penalties if they catch you being dishonest."