Why the Employer Mandate Is Essential to ObamaCare

Megan McArdle:

The employer mandate may have been bad policy…but there was a reason it was included in the final version of the law. I don’t think it’s an exaggeration to say that without it, we wouldn’t have had a health care law.

In other words, with no mandate, employers would dump millions of their employees into the exchange. She quotes a 2009 post by Ezra Klein on two different versions of the Senate (ACA) bill during the lead up to final passage:

And you see the result in CBO’s latest score. The June 15 report estimated that 15 million Americans would lose their employer-based coverage under HELP’s bill. Today’s report estimates that a mere 150,000 will lose their coverage. That’s nothing. And it means that a lot more Americans end up insured and the government spends a lot less in subsidies.

Follow up: See this story on Wegman’s dropping health insurance for its part-time employees. Best quote: “It’s a win-win. The employee gets subsidized coverage, and the employer gets to lower costs.”

Comments (10)

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  1. Randall says:

    From 15 million to 150,000, that is a huge difference! CBO and its predictions/projections are always all over the place.

  2. Nigel says:

    This is what happens when you (as Nancy Pelosi would say) pass a bill to know what’s in it.

    • Miguel says:

      Exactly. If congressmen would have understood the bill in it’s entirety they would have been able to make a better informed decision on waiving the employer mandate, or just not passing the bill in the first place.

      • JD says:

        I don’t know if it matters if they understand the bill or not, I think they’ll do anything as long as it doesn’t hurt them politically. The bill needed to have time to be understood by those of us who hold our politicians accountable.

  3. Howard says:

    Right………….. How is it a win-win for anyone?

  4. Buster says:

    Employers will drop coverage regardless. This way they will lay a penalty ($2,000), which will indirectly come out of workers pay. Workers — at least many of them — will get a subsidy worth far more. The losers will be the higher income workers who will not get a subsidy.

  5. bart says:

    Part-timers wouldn’t have been benefiting much from the employer exemption, since they would be in low effective tax brackets (15% Social Security and Medicare, and perhaps 10% Federal Income Tax). So subsidizing coverage on an exchange might actually be fairer without the employer mandate & penalty, depending on how close it brings part-timers to the subsidy currently enjoyed by most full-time workers.

  6. Bob Hertz says:

    Buster brings up a good point.

    Say that a company has 1,000 employees and pays $7 million a year for health insurance.

    Dropping health insurance and paying $2 million in penalties would lower their costs by $5 million.

    But doing so would expose their highest paid employees to much larger costs than they face today — age rating, smoker penalties, and no subsidies to compensate.

    I suppose the answer would be to keep private insurance for the higher paid, and dump the lower paid.

    This is not so easy to do, but it may be tried.

    I think that nothing will happen on a broad scale until 2015. If the exchanges seem to work well, then dumping may become common.

    The CBO estimates ultimately predicted very puny numbers for those who would join the exchanges. This enabled the bill to pass without an increase in the payroll tax or the income tax for anyone making less than $250K.

    Things could change rapidly after 2014.