THE OBAMA administration on Tuesday announced that it was delaying one of the Affordable Care Act’s mandates — a requirement that medium and large employers offer good health-care coverage to their workers or pay penalties based on the number of workers left uncovered.
White House officials said that the administration had been hearing from businesses and wanted to simplify the rules before imposing reporting requirements and assessing penalties. Others weren’t so sanguine. “This is a clear acknowledgment that the law is unworkable,” House Speaker John Boehner (R-Ohio) declared.
Actually, it’s not. While the administration’s move could be part of a White House political strategy to avoid overheated attacks from Republicans during the 2014 election year, it is no policy disaster, and it certainly doesn’t indict the whole law.
Under the law, all Americans next year will have to obtain insurance from somewhere — from their employers, or from an expanded Medicaid program if they are poor, or on new, subsidized insurance marketplaces the government is setting up for better off individuals seeking coverage. These marketplaces are highly regulated — insurance companies won’t be able to reject applicants based on pre-existing conditions, for example — and they are designed to serve people who can’t get good coverage elsewhere. The individual mandate and the new insurance marketplaces are the core of Obamacare, and they are still scheduled to start on time.
But what will opening those marketplaces do to the employer-provided insurance that many Americans are used to? Might companies choose to drop health-care coverage that they had been offering their workers, handing them over to the marketplaces? These concerns prompted Congress to formally integrate the vast, employer-based insurance system into its 2010 reform, too. Lawmakers paired the individual mandate with the employer mandate, which requires firms with 50 or more full-time workers to cover their employees or to chip in to the system with cash. That is what the administration is delaying for a year.
Some argue that the employer mandate doesn’t actually matter much, because there are still many reasons why firms will want to provide health-care benefits to their employees within the new system. If that’s the case, the employer mandate — or its temporary absence — won’t make much difference, though the government will lose a source of funding for individual insurance subsidies.
Others, though, have predicted that the delay in the employer mandate could mean that fewer companies will offer health coverage, which means that more people would buy insurance in the government marketplaces next year. Some health economists insist that this result is very unlikely, but weakening the employer-based insurance system somewhat wouldn’t necessarily be a bad outcome, either. It is a vestige of the 1940s that, in the long-run, isn’t good for the country. For one thing, it keeps people locked into their jobs for the benefits, even if they would be happier and more effective doing something else.
The real test of the system will be in how the individual insurance marketplaces function in response to expected and unexpected forces in the health-care market. If they have real trouble, or if, when fully implemented, key elements of the system turn out to be economically onerous, then Republicans will have reason to call the law unworkable.