May 14 2014

Liberal Confusion on ObamaCare's Employer Mandate

Hadley Heath

This week the Robert Wood Johnson Foundation (RWJF) and the Urban Institute, two left-leaning think tanks, released a study suggesting the elimination of ObamaCare's employer mandate. Doing so would "eliminate labor market distortions in the law."  Who'da thunk? 

Opponents of ObamaCare have consistently pointed out that forcing employers to offer compliant health insurance (that meets all of the law's new requirements) or pay a penalty are bad for labor markets. Essentially, they raise the cost of employment and discourage hiring. This is bad for all workers, as it depresses job creation and potentially wage growth. Furthermore, ObamaCare's regulations enforce the mandate only for full-time employees, meaning employers (if they have the flexibility to rearrange their workforce) can avoid the mandate by moving more workers to part-time status. These distortions are serious.

But ObamaCare advocates understand this too. All the way up to the White House. Otherwise, what could explain the President's executive actions to delay enforcement of the employer mandate? He and his advisors know that this mandate will have negative consequences for the labor market and broader economy, and they would suffer politically.

The majority of Americans still get their health insurance through their employer, in an employer-sponsored health plan. This means that employer-focused mandates in health policy are of great importance: They affect a great many people. Because of delays in enforcement, however, many people in the American public have not yet realized or felt the impact of ObamaCare on their business or health insurance plan. Some people who use employer-sponsored plans may even be under the impression that ObamaCare's mandates do not affect them at all. This is not the case, but because of delays, the true effect of ObamaCare on employer-centric plans and labor markets has yet to be seen.

So now the RWJF and the Urban Institute suggest repealing the employer mandate forever (although in their report, they use the word "eliminate" rather than "repeal").  These two groups should be congratulated for supporting the right policy approach on the employer mandate. Yes, it would be good policy to eliminate the employer mandate.  Unfortunately, these groups have another motive: They know that repealing just the employer mandate would lessen opposition (especially among the business community) to ObamaCare overall.

If only these liberal groups would also see the negative effect of ObamaCare's other provisions - like narrower doctor networks, higher premiums, and higher out-of-pocket costs - then maybe they'd come around to the conclusion that ALL of ObamaCare needs to be repealed, not just the mandate for employers.

Another left-leaning think tank, the Center for Budget and Policy Priorities, also has some mixed feelings about the employer mandate. A quick search of the CBPP Web site returns an informational page about the employer mandate or "employer responsibility" as liberals call it. The page is positive, declaring that the mandate will not be a deterrent to hiring. But CBPP should review their own assessment from 2009 that says the employer mandate would discourage hiring (especially for low-income workers and most of all for low-income parents), encourage employers to convert full-time workers to part-time workers, and increase administrative costs for employers.

Importantly, in 2009, CBPP was discussing the version of ObamaCare that had passed the Senate Finance Committee, not the final version of the law. The employer mandate that ultimately became law (although it has not been enforced yet in its entirety) changed the penalties from $0 for unsubsidized employees and $4000 for subsidized workers to $2000 for unsubsidized workers and $3000 if a worker receives a subsidy. This softens (but doesn't eliminate) the effect that might have encouraged employers to avoid hiring low-income people, but the other consequences (shorter workweeks, increased administrative costs) will still be as CBPP first predicted.

The employer mandate is bad policy, and I agree with RWJF and the Urban Institute (and CBPP's 2009 analysis) that it should not be a part of our nation's health policy. We should be moving away from an employer-centric model, not doubling down on it. 

But the problem with ObamaCare is not just the employer mandate. The employer mandate represents the flawed premise at the heart of ObamaCare: that the federal government needs to play a bigger role in regulating health insurance and health care.  We don't need a top-down list of mandates for insurers, employers, and individuals, but a bottom-up health marketplace with greater choices, more competition, and lower costs.

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