Who Pays Obamacare’s “Slacker Mandate”? Workers with No Kids!
The “slacker mandate” is the provision in Obamacare requiring employer-based health plans to offer benefits to adult dependents of their workers, up to age 26. I previously discussed research showing the mandate reduced work among adults, aged 19 to 26, and increased the time they spend socializing, sleeping, and exercising.
What about the financial costs of the mandate? Speak to an insurance agent or benefits consultant and they will tell you the cost are fully borne by working parents. In the old days, employer-based health insurance was offered to workers in three sizes: Single, couple, or family. It did not matter how many kids you had. Today, each dependent adds to the premium. So, the “slacker mandate” is paid for by the working parents. That is not really a problem for society. However, there is more to the story.
A remarkable study published by the National Bureau of Economic Research concludes this happened. The slacker mandate reduced wages among workers without children by $211 a month, but did not reduce wages among workers with children (either minor or adult) by a statistically significant amount.
It answers the question: Why mandate slacker coverage? Parents were always free to help their adult children pay for health insurance, just like they can help with rent or car loans. The only government-imposed discrimination was that premiums paid for minor children on employer-based health plans were exempt from taxable income, but if a parent wanted to buy health insurance for an older dependent, he used after-tax dollars.
This could easily be remedied by a simple change in the tax code, instead of a mandate. The only reason for a mandate would be for politicians to transfer the cost of adult dependents’ health insurance from parents to non-parents, in order to promote a “free” benefit to the parents. If working-age parents are more likely to be politically involved than working-age non-parents (a reasonable claim), the mandate clearly benefits politicians.
The latter result makes sense, because the working parents simply paid higher premiums to keep their adult dependents on their employer-based plans. The former result is shocking. How to explain it? I suspect it is easy to impose these costs on workers without kids in the short term because of the high information and friction costs to those workers of learning the cost of the mandate and responding to it.
In the long term, they can respond, but that adjustment would result in an equilibrium where some companies had only workers with kids and other companies had only workers without kids, and there are surely many other costs that would inhibit such an equilibrium.
Pre ACA employer-based plans — Dependent Eligibility Requirement: Employees’ children are eligible for coverage through the age of 18-years-old, 24-years-old if full time student. (Full-time 12 credit hours)
Now with the ACA employer-based plans get all children up to 26-years-old, in school or not, and can charge them $450 a month each or more. This really helped employer-based plans, as usual. Before ACA a 30-year-old or younger male was $50 a month on Individual Medical (IM) and a female was $70 in most states with HSA Qualifying PPO insurance.
Now there is no gender discount for young males and both males and females cost about $250 a month on the Exchange ($6,000 deductible) and the Democrats call this a great success because males are no longer less expensive even though both genders will cost so much more now.
When a young 22-year-old college student was seriously hurt and unconscious, laying in ICU, in the past the insurance company would check and see if they were taking 12 credit hours. If they dropped a class and didn’t tell Dad the insurance company would say, “Sorry, he is not ELIGIBLE for coverage!” Then Dad would set by his bed and when he did wake up Dad would choke him out again for being so stupid.
Would I be correct in saying a young woman whose parents have employer-based coverage could game the mandate to manage the costs of her pregnancy and childbirth?
John, a young male child’s on insurance would have his children covered from the second of birth so if the baby was sick and cost $250,000 the baby is covered. I don’t understand how a daughter or son who is paying premium on their parent’s employer-based plan is “gaming” the mandate when they are paying for insurance.
I was thinking the young-adult dependent would have more option value in terms of timing entry and exit from pool, but I suppose that would not be the case because all would be limited by open season.
I wonder if the slacker mandate did not reduce the wages of workers with children because they derive some benefit (and cross subsidies) from employers and childless workers through the mandate. Since health benefits are a portion of compensation, the additional benefits for their children could offset any wage reductions.
Why do you call it the “slacker mandate”? Only 29% of small businesses in Florida offer insurance to employees so these children could be working for small businesses who do most of the hiring in America. People are so confused that they might think that pre-tax premiums at the parents’ employer is a better deal than paying for insurance on the Exchange with after-tax dollars.
Devon, do you think adult children who work for small employers are slackers?
We did not name it the “slacker mandate.” We are using the vernacular term. I agree, we should not lay all responsibility on the young adults.