Yesterday the Obama administration announced that it was delaying for a year the employer mandate provision in the Affordable Care Act; described as a continuing effort to make the reporting process for companies easier. A simplified explanation of the provision is that it calls for employers with more than fifty fulltime (deemed by the bill as those working more than 30 hours a week) employees that do not offer health insurance to offer coverage or pay a penalty. In that sense it isn’t actually a mandate (any more than the individual component is), but rather akin to a “play or pay” model. The purpose of this part of the bill was to reduce the likelihood of companies dumping their employer-sponsored coverage (ESI) once the state-based individual exchanges opened. Coverage for individuals on the exchange would be more expensive to the federal government because of the subsidy structure, therefore increasing the overall cost the bill. As John McDonough explains, to “keep the total cost of the law down, some kind of employer requirement was considered essential.” The employer mandate as it exists is the legislative outcome.
Politics. Businesses who employ cheap labor now smell blood in the water, sort to speak, as this amounts to a lobbying victory. It’s not difficult to imagine that private interests will now focus on getting the mandate repealed in it’s entirety. The delay also presents another opportunity for ACA opponents to characterize the law as an ill-conceived disaster. My own Republican House Representative stated that the decision amounts to an admission by the administration that the requirement “is crushing middle class jobs.” Of course, as Dean Baker contends here, the logical extension of that premise would imply that the delay would boost such employment. I won’t hold my breath on that possibility.
Several people I generally admire are in agreement; the employer mandate is a bad policy idea. The possibility of deleterious employment effects, while comparatively modest, are not insignificant. While the vast majority of employers who would be affected by the mandate already offer health insurance coverage — around 90 percent — those who do not are primarily employers of low-wage service workers and to a lesser extent local education corporations. It’s argued that the long-term outcome is such that the policy would amount to a tax on low-wage employment, ultimately reducing the take home pay for such workers. On it’s own the arguments against the mandate are persuasive.
I’ve wrote before that I’m not particularly wedded to the mandate. Yet the provision doesn’t exist as policy ideal but the result of a political compromise. The House version of the health reform bill included a different mandate, measured as a percentage of a firms expenditures on insurance coverage. That framework looks as though it would have been a better approach, lacking the complications inherent in tying the penalty to work hours, but as Ezra Klein reports this was dumped in favor of the current structure largely because it leaves most companies unaffected. Which is to say, the mandate we have is the mandate most businesses lobbied for during the legislative process. This is important. In a more ideal world — from all sides of the ideological spectrum — ESI wouldn’t exist. Beyond that there’s disagreement but the basic distaste from healthcare wonks is nearly universal. However, healthcare wonks for better or worse do not dictate national policy. Elected legislators who face pressure from constituent and business interests do. Thus, the law as it exists.
A bill as large and as complicated as the ACA should inevitable require tweaks, but all of the political incentives for the GOP point in the direction of ensuring the law is more dysfunctional that it otherwise needs to be. Conservatives that have spent years using every development of the ACA’s implementation to call for wholesale repeal have little to add to the mandate’s delay other than to reaffirm their preexisting viewpoints. The realistic counter-factual isn’t want idealists imagine but what politicians are willing to compromise on. Right now that amounts to, well, nothing. Republicans aren’t interesting in passing legislation that would improve the ACA. Full stop. That is all that effectively matters. Without a political fix we’re left with unilateral administrative actions; an outcome that should please no one.