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.