Political Animal


February 20, 2013 1:30 PM Yet another threat to Obamacare: employers evading the mandate

By Kathleen Geier

Yesterday, Ed Kilgore wrote that “it’s hard to suppress the feeling that ACA implementation is not going the way it was originally intended.” He was referring to two unexpected developments. One is that many states are refusing to enact the Medicaid expansion provision of ACA, and the other is that a surprisingly large number of states (26, to be exact) are refusing to set up their own health insurance exchanges. This will force insurance seekers in those states to access coverage from a soon-to-be-created federal exchange.

On top of all this, yesterday, the Financial Times reported about yet another threat to the ACA: the attempts of many employers to evade the Act’s health care mandate. As Barney Jopson and Alan Rappeport wrote:

US retailers and restaurants chains that employ millions of low-wage workers are considering cutting working hours or paying fines rather than enrolling employees in health insurance plans under Barack Obama’s landmark healthcare law.

Why are they doing this? It’s simple: the Kaiser Family Foundation estimates that “the average annual cost to employers of insurance is $4,664 for a single worker and $11,429 for a family.” On the other hand, the annual fine for failing to pay for coverage is a mere $2,000 per employee.

In some cases, employers may not even be required to pay a fine. The law doesn’t require coverage for part-time employees, nor does it apply to small businesses (which are defined as workplaces with 50 or fewer employees). So some employers are cutting back employee hours and/or staffing levels to avoid the fine.

At this point, it’s hard to say how widespread employer attempts to evade the mandate will be. According to recent analyses produced by the Congressional Budget Office, the ACA is expected to cause only “a small reduction in the number of people receiving employment-based health insurance.” But a 2011 McKinsey report found that “the shift away from employer-provided health insurance could be greater than expected.”

It has also been argued (by Doug Henwood, for example) that the long-term effects a collapse in employer-provided health insurance may not ultimately be so bad, since it might ultimately might increase momentum for single payer. But I tend to be distrustful of those kind of “the worse, the better” arguments. Over the past several decades, the continuing deterioration of the economic status of working Americans has tended to lead not to a more robust social democracy, but rather to increasingly intense rounds of right-wing backlash. And in the short- and medium-term, the suffering of many Americans who lose their employer-sponsored health coverage could be enormous.

Overall, I continue to worry about a number of significant threats that still could prevent the ACA from being successfully implemented. But over at Talking Points Memo, sociologist and political scientist Theda Skocpol argues that most of these threats are “being hyped out of proportion.” Skocpol, who has closely studied the implementation of other landmark programs like Social Security and Medicare, points out that in America, there always tends to be massive resistance and “protracted political contention” over these kinds of “expansions of the U.S. welfare state.” But based on history, she does not believe that the ACA will “be permanently thrown off track.” Let’s hope she’s right!

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee


  • rover27 on February 20, 2013 2:47 PM:

    The "conservatives" that opposed Social Security and Medicare weren't nearly as radical and unhinged as today's "conservatives". Nor as nearly well financed. So I don't know if the comparison is right.

  • angler on February 20, 2013 2:47 PM:

    The perfidy of GOP legislatures and cheapskate employers may not destroy the ACA, but their manipulation of the law brings back the fights within the Democratic Party to have a more robust healthcare law form the start.

  • angler on February 20, 2013 2:51 PM:

    Adding to above, a more robust law like single payer, the public option, lowering the Medicare eligibility age, etc. that would be more impervious to these tactics. In the end the year of bargaining within the party ended up with a weaker law that the right still hates. And we are still almost one year away from the mandate and the promise of near universal coverage.

  • golack on February 20, 2013 2:51 PM:

    Yes, but many places are looking for excuses to drop health care, cut hours, etc. ACA gives them cover to do it now. Instead of having a bunch of disgruntled employees made at you, get them mad at the gov't. The changes mentioned were happening anyway, hence the need for the safety net.

  • Bear on February 20, 2013 3:36 PM:

    If someone does not have employer provided insurance, won't they then be eligible for insurance through the exchanges? And if they have low wages for subsidized insurance through the exchanges?

    Personally, I've always wished my insurance WAS NOT tied to my job. When I recently changed jobs, I ended up with having to find a new doctor because I had different insurance which she did not accept.

    The problem ultimately is how to make sure those employers not providing health insurance pay adequately into the system so the people can afford insurance on the exchanges.

  • exlibra on February 20, 2013 3:54 PM:

    [...] the annual fine for failing to pay for coverage is a mere $2,000 per employee.

    Perhaps "per quarter" has been accidentally omitted in the final language? I'm joking, of course, but that's what it should have been.

    But, ultimately, I agree with Bear, @3:36PM. Healthcare insurance should really be decoupled from the employment.

  • Celui on February 20, 2013 3:54 PM:

    This is a real problem emanating from attempts to adapt a 'great idea' policy within the constraints of a rampant political ideology which has as its primary goal to discredit a sitting president and ruin any chances for the lower/middle classes to gain or maintain a reasonable quality of life. Anyone who considers the benefits and cost savings offered by universal healthcare will recognize the need to mandate such coverage and universal contributions to this coverage. The canard of 'socialism' is always a cry from the Right to discredit anything which might serve everyone through some sort of income-scaled contribution mandate. Why this "government of the people, by the people, and for the people" should continue to perpetrate distinctions in healthcare based on income level, race, social status, or locality is completely antithetical to Lincoln's famous address: "FOR the people". The ACA can become the first steps towards universal quality coverage that will, according to projections by responsible economists, save money, improve quality of healthcare and access, and simply reduce the budget deficit. So--what's not to like? It's FOR the people. 'Nuff said.

  • c u n d gulag on February 20, 2013 4:49 PM:

    Ok, so why, now that the law is in place, increase the penalty and make it punitive?

    And if we can't increase the penalty, maybe there are other measures that might be there to make it less cost-efficient for employers to screw their employees.

    I read a lot of the law when it was passed, but I don't remember what can be done.

    Maybe someone else has some ideas?

  • Doug on February 20, 2013 4:54 PM:

    I believe those attempting to circumvent the AA by reducing the hours of their employees may wish to look at the legislation again. I understood that there's a clause that states if it's determined that an employer has cut his workers' hours to avoid providing HCI and goes on to hire more employees to make up for the reduced hours of those already employed, that employer will STILL be subject to the fines. Feel free to check, I could be mistaken.
    I agree with exlibra, it's a pity the fines aren't larger. Perhaps after 2014...

  • boatboy_srq on February 20, 2013 5:14 PM:


    Healthcare insurance should really be decoupled from the employment.

    IIRC healthcare insurance was originally coupled with employment to allow employers to pay less in salaries. The original idea was that "benefits" were cheaper than wages. If we allow decoupling - whether it's agreeable or not - then we void all that non-salary compensation, and we go immediately back to debate over what is a "fair" wage. With all the hoopla over the Minimum Wage, any suggestion of lobbying for a Fair Wage is going to be all but impossible.

    I like the idea in the absolute, but given how we got here I doubt it will fly.

  • JackD on February 20, 2013 5:39 PM:

    Actually, the tie to employment started during WWII when there were wage freezes to allow employers to compete for employees without increasing "wages".

  • exlibra on February 20, 2013 6:38 PM:

    Jack D's version is the one I've always heard, too, boatboy.