Should the Employer Mandate Be Eliminated Altogether?

This week the Obama administration announced that it was delaying implementation of the "employer mandate" part of Obamacare, so companies won't be required to cover their workers until the beginning of 2015 instead of the beginning of 2014. Their stated reason is that they need more time to work with employers to implement the somewhat complex reporting requirements, and they're trying to be flexible and respond to employers' concerns. Which is probably true, but it's also true that the issue has become something of a political headache, with lots of news stories profiling employers saying the mandate is going to destroy their businesses or lead them to lay off workers and cut back their hours so they don't have to comply.

We'll get to what's true and false about those news stories in a moment, but it's important to understand that the "mandate" isn't really a mandate at all. First, it only applies to businesses with 50 employees or more. And second, if employers still don't want to provide health insurance, they can pay a small fine that is only a fraction of what health insurance costs. So if you're an employer who really, really doesn't want to give his employees health insurance, you won't have to.

As Sarah Kliff suggests, delaying the mandate now to ease the political pressure won't make it any easier a year from now, and may make it worse, since opponents will be emboldened by this delay, seeing it as a victory in their unending war on Obamacare. That's possible, but it's also a sign of how demented this whole process is. Instead of everyone trying to make sure the law takes effect with a minimum of disruption and goes as far as possible to accomplish the goals everyone says they agree on, you have powerful forces (one political party, well-funded private interests) working day and night to make sure it fails.

Now, to those news stories. You've undoubtedly seen them, a profile of an employer with 48 workers who says, "I'd love to hire more people, but then I'd have to give them health insurance! Obamacare's burdensome regulations are killing my business!" These employers are easy to find, because all a reporter has to do is call up a group like the National Federation of Independent Business, a conservative interest group, and they'll be happy to hook the reporter up with one. But in the real world, they're actually pretty rare. For starters, how many businesses are there that have exactly 48 or 49 employees, so they're about to cross that threshold? Not too many. And how many of those don't already offer health insurance? Fewer still.

Ninety-eight percent of firms with over 200 employees already provide health insurance, as do 94 percent of those with between 50 and 199 employees. Among firms with 25-49 employees, the ones that might be on the cusp, 87 percent already provide insurance. So the guy you see on the news complaining about it? He's basically Ebeneezer Scrooge, the guy who, unlike nearly all his peers, won't give his employees the benefits that would make their lives a little more secure.

For the record, I think we should scrap the system of people getting insurance through their employers altogether. If you work for Scrooge, you may have to put up with his ill-treatment and poor wages, but at least you shouldn't have to rely on him for your health coverage as well. It no longer makes economic sense, either. The chief benefit of employer-provided insurance is that people can get more affordable insurance when they band together in groups, but now that we have an individual mandate that puts everyone in the same market, we can (with the right adjustment of the insurance rules) all be one big group, or at least one big group per state. The only real argument in favor of maintaining the employer-based system is inertia: it may be riddled with problems, but we've been doing it this way for a long time, and changing would be a hassle.

Which is true enough, but it's not particularly persuasive. In the meantime, even some liberal health wonks think Obamacare's version of an employer mandate was poorly designed and ought to be eliminated (here's Ezra Klein making the case). Given that we're talking about a relatively small number of employers, that wouldn't be a huge deal, and after all, the law's supporters have said from the beginning that as with any complex piece of legislation, there will have to be tweaks and adjustments as it's implemented. But the Obama administration is unlikely to consider scrapping it, since that would be a victory they couldn't bear giving their critics.

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