Will Obamacare's Employer Mandate Ever Be Implemented?



Several days ago, a trio of researchers at the Urban Institute released a paper titled "Why Not Just Eliminate the Employer Mandate?" The paper argues that the provision in Obamacare requiring employers with 50 or more workers to provide health coverage or pay a penalty could be ditched without significant effect on insurance coverage.

The paper's particulars are probably less relevant than its overall argument: It's the latest in a series of motions designed to test the waters for the elimination of the requirement. Movement began last summer, when, over a long holiday weekend, the administration called for a one-year delay of the employer mandate and reporting requirements. It continued this year when an additional year's delay for smaller businesses, as well as a reduction in the requirement for larger employers, was tacked on.

At this point, it's widely expected that the provision will remain in limbo permanently. Former White House Press Secretary predicted last month that the provision would never go into effect; the Urban paper will give the administration ammunition to defend the move on policy grounds if and when another delay or permanent postponement is announced.

The policy rationale for ending the employer mandate is clear enough: Because it requires employers to provide coverage for full-time workers once the 50-employee threshold is reached, it creates incentives for firms to avoid hiring, or to cap employee hours so that they do not qualify as full time. End the mandate, and those incentives disappear.

But the employer mandate wasn't included in the law for no reason. It's meant to prevent employers from simply dropping coverage and sending full-time workers to get insurance through the exchanges. In an initial draft of the law that lacked a mandate, the Congressional Budget Office (CBO) estimated that about 15 million employees would lose their workplace coverage and be sent to the exchanges instead—increasing the law's disruption of current coverage arrangements and the cost of subsidies for exchange-based insurance. The inclusion of an employer mandate significantly mitigated the CBO's estimate of these effects.

This is an old concern. If a health law creates a venue for subsidized coverage outside the workplace, won't employers drop coverage and shift workers to new insurance? When Hillary Clinton worked on a health policy reform plan in the 1990s, she remarked in congressional testimony that "we worry that the numbers of people who currently are insured through their employment will decrease because there will no longer be any reason for many employers" to offer coverage to workers.

The more important concern, however, is not the transition away from employer-sponsored coverage, which is a necessary and desirable component of most productive health reform proposals (although Obamacare's mechanism is probably not ideal). Instead, the question is whether the Obama administration would have the legal authority to abandon the employer mandate, should it choose to do so. The initial delay, announced last summer, was, generously, a legal stretch. The second delay, announced in February, was almost certainly an illegal maneuver, as even some supporters of the law have conceded. Further postponements would presumably also be illegal. If the administration is to proceed as Gibbs has suggested, then it will need more than a policy rationale. It will need a basis for its legal authority as well.