Yes, We Can.....Eliminate Obamacare's Employer Mandate

Let's face it: Obamacare was a 2,000 page monstrosity of a health care bill. None of the politicians read the bill before passing it. We're still at the point where we're untangling the bill and discerning all the effects of the provisions in Obamacare. Aside from the individual mandate, the part of Obamacare that received a lot of attention was the employer mandate. The employer mandate was a penalty in the bill stating that any employer with 50 full-time equivalent (FTE) employees had to provide healthcare for their employees. The flowchart below illustrates how the employer mandate works.

In addition to the reasoning why the individual mandate received flack (i.e., you're forcing individuals to purchase a good or service), conservatives and other naysayers were, or rather are worried that the employer mandate will either cause less hiring or force employers to change their full-time employees to part-time in order to avoid the mandate. At least for the accusation of Obama creating a "part-time America," the data show that it essentially a myth. Whether it will cause more unemployment or adversely affect business practices, the evidence is primarily anecdotal since the mandate is not supposed to fully take effect until 2016. Proponents argue that the employer mandate is a necessary component to fund the health care exchanges. A recent report by the Left-leaning Urban Institute, however, refutes the necessity of an employer mandate. What has the Urban Institute found that can add to the discussion?

The most significant finding is that removing the employer mandate would only decrease the number of insured individuals by 200,000 (Urban Institute, p. 1), which would mean that the employer mandate is not necessary for Obamacare to survive (p. 4). What was also interesting was that the employer mandate acts regressively, which is to say that low-wage employees would take the greatest brunt of the mandate (p. 2-3). I also appreciated the sobering analysis that although economic theory would suggest that increasing the cost of labor would adversely affect employment, there are also other factors that go into hiring, including efficiency and reduced turnover (p. 2). There is also the reality that health care benefits can actually be used to attract high-quality labor.

But why is it that the employer mandate would not have a huge impact on the number of insured? Because the government already provides tax incentives to perpetuate the employer-based insurance system (p. 3). There is also the matter of revenue that would be lost by those 200,000 who would not be paying into the system. The Congressional Budget Office had the figure at $130B from 2014 to 2023, but the Urban Institute estimates to be a significantly lower $46B (p. 4). To quote the Urban Institute's summary (p. 4), "eliminating the employer mandate would eliminate labor market distortions in the law, lessen opposition to the law from employers, and have little effect on coverage." Since it's only projected revenue, I am inclined to say that if Congress wants to better fund Obamacare or contend with long-term debt issues, it should find better ways to go about it. To quote the Urban Institute's summary (p. 4), "eliminating the employer mandate would eliminate labor market distortions in the law, lessen opposition to the law from employers, and have little effect on coverage."

Keeping the employer mandate will most likely cause more harm than would be lost in the projected revenue stream (see here and here). The Obama administration has already delayed the employer mandate twice, but in reality, it would do well to simply eliminate a provision that is superfluous as it is unpopular.