By Ricardo Alonso-Zaldivar - July 3, 2013

WASHINGTON (AP) -- President Barack Obama's health care law, hailed as his most significant legislative achievement, seems to be losing much of its sweep.

On Tuesday, the administration unexpectedly announced a one-year delay, until after the 2014 elections, in a central requirement of the law that medium and large companies provide coverage for their workers or face fines.

Separately, opposition in the states from Republican governors and legislators has steadily undermined a Medicaid expansion that had been expected to provide coverage to some 15 million low-income people.

Tuesday's move - which caught administration allies and adversaries by surprise - sacrificed timely implementation of Obama's signature legislation but might help Democrats politically by blunting an election-year line of attack Republicans were planning to use. The employer requirements are among the most complex parts of the health care law, designed to expand coverage for uninsured Americans.

"We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively," Treasury Assistant Secretary Mark Mazur said in a blog post. "We have listened to your feedback and we are taking action."

Business groups were jubilant. "A pleasant surprise," said Randy Johnson, senior vice president of the U.S. Chamber of Commerce. There was no inkling in advance of the administration's action, he said.

"We commend the administration's wise move," said Neil Trautwein, a vice president of the National Retail Federation. It "will provide employers and businesses more time to update their health care coverage without threat of arbitrary punishment."

But the delay could also whittle away at the law's main goal of covering the nearly 50 million Americans without health insurance.

Liberals immediately raised concerns. Will employees be able to get taxpayer-subsidized individual coverage through new health insurance markets if their company does not offer medical benefits? Uninsured people can start signing up Oct. 1 for the new individual policies.

"If the administration is going to give employers a break, it should not do that at the expense of millions of uninsured or underinsured workers who have been looking to have health insurance available to them on Jan. 1, 2014," said Richard Kirsch, a senior fellow with the Roosevelt Institute in New York, a think tank dedicated to promoting progressive policies.

Under the health law, companies with 50 or more workers must provide affordable coverage to their full-time employees or risk a series of escalating tax penalties if just one worker ends up getting government-subsidized insurance. Originally, that requirement was supposed to take effect Jan. 1, 2014. It will now be delayed to 2015.

Most medium-sized and large business already offer health insurance and the mandate was expected to have the biggest consequences for major chain hotels, restaurants and retail stores that employ many low-wage workers. Some had threatened to cut workers' hours, and others said they were putting off hiring.

Business groups have complained since the law passed that the provision was too complicated. For instance, it created a new definition of full-time workers, those putting in 30 hours or more. It also actually included two separate requirements, one to provide coverage and another that it be deemed "affordable" under the law. Violations of either one exposed employers to fines. But such complaints until now seemed to be going unheeded.

There is no coverage requirement - or penalty - for smaller businesses. Also, for businesses of any size, there is no penalty if their workers are poor enough to be eligible for Medicaid.

The delay in the employer requirement does not affect a provision in the law that requires individuals to carry health insurance starting next year or face fines. That so-called individual mandate was challenged all the way to the Supreme Court, which ruled last year that the individual requirement was constitutional since the penalty would be collected by the Internal Revenue Service and amounted to a tax.

Tuesday's action could provide cover for Democratic candidates in next year's congressional elections.

The move undercuts Republican efforts to make the overhaul and the costs associated with new requirements a major issue in congressional races. Democrats are defending 21 Senate seats to the Republicans' 14, and the GOP already had begun to excoriate Senate Democrats who had voted for the health law in 2009.

Senior White House adviser Valerie Jarrett cast the decision as part of an effort to simplify data reporting requirements.

She said since enforcing the coverage mandate depends on businesses reporting about their workers' access to insurance, the administration decided to postpone the reporting requirement, and with it, the mandate to provide coverage.

"We have and will continue to make changes as needed," Jarrett wrote in a White House blog post. "In our ongoing discussions with businesses we have heard that you need the time to get this right. We are listening."

Republicans called it a validation of their belief that the law is unworkable and should be repealed.

"The president's health care law is already raising costs and costing jobs. This announcement means even the Obama administration knows the 'train wreck' will only get worse," House Speaker John Boehner, R-Ohio, said in an email. "This is a clear acknowledgment that the law is unworkable, and it underscores the need to repeal the law and replace it with effective, patient-centered reforms."

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Associated Press writers Donna Cassata, Sam Hananel and Josh Lederman contributed to this report.