Republicans are right: The employer health insurance mandate is dumb.
But gently rejiggering it, as the GOP is trying to do, is not the solution. The mandate should instead get full death-panel treatment and be euthanized once and for all.
The employer mandate is one of the most contentious provisions of the United States’ most contentious law, the Affordable Care Act. Intended to help workers retain their health plans and encourage more employers to pitch in as part of the national effort to expand coverage, it works by requiring large firms to offer full-time staffers health insurance or else pay penalties.
Alas, defining what counts as a “large” firm — and who is a “full-time” worker — turns out to be tricky.
Initially, the mandate applied to businesses with at least 50 full-time-equivalent workers, and full-time work was defined as at least 30 hours a week. Such sharp cut-offs detonated a wave of threats that unhappy employers would chop hours and staffing levels to avoid triggering penalties. The employer mandate — like other policies that incentivize employers to provide insurance — distorts the labor market in other, subtler ways, too, by putting downward pressure on wages (as employers offset the costs of health benefits) and rendering older workers less attractive (since they consume more health care).
The provision soon became the right wing’s poster child for all the ways Obamacare was both anti-business and anti-worker.
Aware of these political and economic toxicities, the White House delayed and watered down the mandate multiple times, leading many analysts to wonder whether it would ever fully go into effect.
That has not kept the pitchfork-wielding anti-Obamacare partisans at bay. Instead, it has emboldened them. These unilaterally announced delays are, somewhat ironically, the basis for House Speaker John Boehner’s lawsuit alleging that President Obama has overstepped his constitutional authority. That’s right: Republicans claim to be mad that Obama delivered a policy outcome they say they want, too.
Perhaps this is why, for all its grousing about the employer mandate, in two big votes this month the Republican-led Congress loosened the rule only a bit, rather than repeal it. The Hire More Heroes Act exempts some veterans from counting toward the 50-worker minimum, and the Save American Workers Act redefines full-time employment as 40 hours per week rather than 30.
These bills both miss the mark. The Save American Workers Act — which Obama has vowed to veto — would hurt even more workers than the existing mandate would. That’s because many more Americans work about 40 hours a week than 30 hours, and it’s those close to the “full-time” margin who are most at risk of having their hours or jobs cut. Boehner (R-Ohio) and Senate Majority Leader Mitch McConnell (R-Ky.) have claimed that this change would remove “an arbitrary and destructive government barrier to more hours and better pay created by the Affordable Care Act.” But in reality it just creates another arbitrary — and more destructive — one.
Rather than debating whose version of the mandate is less harmful, Congress and the White House should join forces and eliminate it. After all, unlike the other Obamacare mandate — that all people have health insurance — the employer mandate is not all that crucial to the smooth, death-spiral-free functioning of the nation’s health system, now that we have a thick individual market.
The fear, of course, is that without an employer mandate, lots of firms will cancel their plans and dump workers onto the new health-insurance exchanges created under the law. Despite some early threats, we’ve actually seen little evidence of this so far (the employer mandate has been delayed, remember). Estimates from the Urban Institute also suggest that the number of additional workers who would lose coverage if the employer mandate permanently disappeared would be relatively low, in part because there are so many other strong incentives (such as tax breaks) for firms to continue offering health benefits. And on the bright side, those most at risk of losing employer-offered insurance in the absence of a mandate — low-wage workers — might actually benefit from this outcome, since they would become eligible for federal subsidies if dumped.
Which is perhaps the real reason the White House and congressional Republicans both seem unhappy with the employer mandate but reluctant to fully dismantle it: Doing so would increase federal deficits by eliminating revenue raised from penalties and increasing the pool of Americans eligible for subsidies. But there are better, less distortionary ways to address these budget concerns while still promoting access to affordable health insurance — if only Congress and the White House could just admit they’re both on the same page.