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July 03, 2013 10:04 AM Employer Mandate Delay: Big Trouble Or Small Potatoes?

By Ed Kilgore

It’s inescapable that the administration’s announcement of a one-year delay in implementation of the Affordable Care Act’s “employer mandate” (more accurately, the requirement that larger employers back up individual employee coverage claims, and pay a fine if they fail to offer or drop employee coverage) will be viewed through the prism of support for or opposition to the overall health reform initiative. We’re hearing the lusty cheers of barbarian joy from conservatives who would be very pleased if every negative prediction about the difficulty of implementing Obamacare turned out to be true, and nervous defensiveness from Obamacare supporters who aren’t sure how big a deal this particularly issue actually is.

Timothy Jost of the Health Affairs Blog summarizes the “not a big deal” case succinctly:

As a practical matter, most employers subject to the mandate already offer insurance. The mandate only covers employers with more than 50 full-time or full-time-equivalent employees. Ninety-eight percent of employers with more than 200 employees offer health insurance, as do 94 percent of employers with 50 to 199 employees. The vast majority offer insurance that is both affordable and adequate, as those terms are defined in the ACA. All of the reasons employers now have for offering coverage to their employees — significant tax subsidies, recruitment and retention of employees, and increased productivity and decreased absenteeism when employees are healthy — will continue to exist without the mandate penalty.
It can be expected, therefore, that most employees will continue to offer coverage. It is to be hoped, moreover, that employers who have been claiming that they have to reduce their employee’s hours of work to below 30 to avoid the penalties will restore the lost hours, and small employers fearful of growing over the 50 FTE threshold will focus on growing their businesses rather than worrying about the ACA. Perhaps the extra year is what is needed to reduce anxiety and build confidence in the business community in the workability of the law.

Some ACA supporters actually cheer the mandate delay and argue that it should be junked entirely as an unnecessary accomodation of the old employer-based system for providing health coverage. Ezra Klein argues that the form of the mandate that made it into the bill created an artificial problem in that the relatively few employers affected by the mandate were given incentives to reduce full-time jobs for low-wage employees.

The bigger problem is that all these arguments take place in a political vacuum: if the mandate as currently constructed has serious but “fixable” flaws, there’s really nothing the administration can do other than delay its implementation or tinker around the edges. So long as Republicans control the House, there will be no legislative “fixes.”

And that gets back to the “optics” of the delay. As WaPo’s Sarah Kliff explains, resistance to the mandate from affected businesses made his politically a no-win situation:

By delaying a requirement that all large employers provide health insurance, the Obama administration heads off the unseemly spectacle of companies vowing to cut jobs or workers’ hours to avoid the costly mandate.
But the late Tuesday action is not a free pass: It contributes to critics’ claims that the White House does not have the ability to launch its biggest legislative accomplishment on schedule.

In other words, the employer mandate glitch will reinforce predictions that the next big Obamacare benchmark, the beginning of enrollment of the uninsured in health exchanges in October, will be a chaotic disaster. Since the two issues are largely unrelated and involve different parts of the ACA implementation apparatus, that’s no really warranted, but you can’t take the politics out of politics. Larry Levitt of the Kaiser Family Foundation sums it up:

I think the practical effect on how people will get health insurance next year will be quite modest. And, it will make for a smoother implementation of the health reform law, giving employers time to be more deliberative in how they come into compliance, especially for part-time and temporary workers. I’d say the biggest risk of unintended consequences would be if people over-generalize from this decision to delay one part of the law. There have been challenges in implementing the ACA, and no doubt there will be more. But this decision doesn’t mean that other parts of the law are necessarily unworkable or not ready.

No way around it: People will in fact “over-generalize from this decision to delay one part of the law.” But health reform supporters need to keep hammering away at one simple fact: there is no rational claim about the adverse effects of Obamacare or its implementation that is worse than the health care status quo. And that’s why the ACA was enacted in the first place.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

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