The Obama administration announced late Tuesday that it has delayed until 2015 the healthcare reform law’s requirement that businesses with more than 50 employees must offer them insurance, bending to criticism that requirements were burdensome and complex.

“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mark Mazur, the treasury department’s assistant secretary for tax policy, explained in a blog. “We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so.”

As required by the Affordable Care Act, beginning Jan. 1, employers faced a $2,000 penalty for each full-time employee who did not get health coverage. Some critics of the ACA had predicted that employers would cut hours or employees to avoid the requirement.

“This one-year delay will provide employers and businesses more time to update their health care coverage without threat of arbitrary punishment,” said Neil Trautwein, vice president and employee benefits policy counsel of the National Retail Federation, in a statement responding to the administration’s announcement.

[Related: One year after SCOTUS, health law is even more complex.]

The delay will provide the time for the federal government to consider ways to simplify the new reporting requirements and to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees.

Mazur said the administration will publish formal guidance describing this transition within the next week. 

The administration is also working on rules detailing how the ACA’s information reporting provisions will be implemented. Mazur said in his blog that those proposed rules should be released this summer. Once those rules are issued, Mazur said, the administration will work with the effected employers, insurers and others in an effort to get voluntary reporting in 2014 rather than waiting until 2015.

“Real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015,” he said.

The delay to 2015 is also being extended to shared-responsibility payments because it would be difficult to determine which employers were owed those payments, Mazur said. These actions also do not affect employees’ access to the premium tax credits available under the ACA.

Some business organizations praised the decision to delay enforcement of the mandate, like the U.S. Chamber of Commerce. The American Hospital Association, however, criticized the delay as an erosion of the ACA’s coverage goals.

Rich Umbdenstock, AHA president and CEO, said the decision “is troubling for those individuals who will not gain coverage through their employer. The goal of the ACA was to extend coverage to the uninsured, which required a shared responsibility from all stakeholders.”

For employers, the delay may not change all that much.

Dave Morgan, a benefits advisor with the Southern California insurance services firm Morris & Garritano, said he’ll be advising clients to mostly carry on, uncertainties aside.

“Employers who intend to sponsor a plan in 2015, should maintain affordable coverage in 2014.  Once employees receive  subsidized coverage for their dependents, there may  be challenges bringing them back into the group for 2015,” Morgan said.

“Much remains unknown — carriers’ new underwriting guidelines, for instance — but high participation levels generally have a positive effect on a plan’s costs and therefore a sponsor’s options in the marketplace, whether fully insured or alternatively funded.”

Another uncertainty: If employers don’t report their coverage offerings in 2014, how can exchanges and the IRS verify that employed individuals buying insurance aren’t offered ACA-defined affordable coverage?

[Related: Grad students with newborn get lost in CHIP bureaucracy.]

Under the ACA, employed individuals from large firms are only eligible for exchange subsidies if they are not offered coverage costing less than 9.5 percent of household income or covering at least 60 percent of their healthcare costs. Under the mandate’s reporting requirements that are being delayed, employers would submit the data to the IRS, letting the agency determine if their employees would be eligible.

The Treasury Department probably considered the possible ramifications of a delay, Washington and Lee University law professor Timothy Jost wrote in Health Affairs. According to proposed premium tax credit rules, exchanges can rely on an individual’s attestation of job-based insurance availability if they can’t be verified.  

But this raises other questions, as Jost pointed out: “Will the lack of an employer mandate mean that many more individuals will become eligible for premium tax credits, either because their employers drop or do not expand coverage, or fail to respond to requests to verify coverage? If employers fail to expand coverage to employee’s children, as they would have had to under the mandate, more children may end up on CHIP or Medicaid, or become eligible for premium tax credits.”

Associate Editor Anthony Brino contributed to this report.

See also:

Q&A: On the inevitability of an HIX delay

New AMA president says group will 'do whatever we can' to carry out ACA

Healthcare Finance News: Employers unaware of ACA compliance cost on group health benefits