Drop Obamacare’s Employer Mandate, Lose $149 Billion
Policy + Politics

Drop Obamacare’s Employer Mandate, Lose $149 Billion


Could a provision central to financing much of the president’s health care law be “the next to go,” as former White House Press Secretary Robert Gibbs predicted last week?

The oft-delayed employer mandate, which requires employers with more than 50 workers to offer health coverage to all of their employees or pay a penalty, is caught in the middle of an ongoing spat between pundits, politicians and health policy experts. Some call for its repeal, while others defend its importance to the law.

The main purpose of the employer mandate is to stabilize the employer-sponsored system of health coverage. Currently, about 44 percent of Americans receive coverage through their employer, a recent Gallup poll found. Other studies show that more than 170 million employees, retirees and dependents are insured through employers.

Related: Obamacare Spells the End of Employer-Based Coverage

Health experts say repealing the law would cost the government billions of dollars in lost revenue that it would have otherwise collected through penalties imposed on companies not complying with the law. Under the mandate, large companies with 100 or more workers that do not offer insurance will pay $2,000 for every employee after the first 30.

When the administration pushed the employer mandate back for a second time in February, the Congressional Budget Office estimated that the one-year-delay would cost the Federal Government about $10 billion in lost revenue.

Now the provision won’t go into effect until 2015 for large companies and 2016 for those with 50 to 99 workers. Some, like Gibbs, say it will never actually be implemented at all. If that’s the case, and the provision is scrapped altogether, the Rand Corporation estimates that it would cost upwards of $149 billion in lost federal revenue over the next decade.

Related: Obamacare Cuts Uninsured Rate Again

Still, many health experts following the debate don’t expect the employer mandate to be repealed anytime soon. Zeke Emanuel, former adviser to President Obama and one of the main architects of the health care law told The New York Times that Gibbs is “wrong period.” Instead, Emanuel predicts that the employer mandate will have a dramatic impact on the way people get health insurance.

Others experts agree that the mandate isn’t going anywhere but say, hypothetically speaking, getting rid of the provision wouldn’t undermine the health care law itself.

Judith Soloman, health policy expert for the Center for Budget and Policy Priorities said if the employer mandate were repealed, “The law would survive... Unlike the individual mandate, it doesn’t have a big impact on the risk pool, and if it was repealed they (Congress) would have to come up with a way to offset the cost of lost revenue somewhere else.”

Still, Soloman argues that the employer mandate should remain intact and said it discourages employers from dropping employee coverage. Repealing the mandate would mean more companies might be tempted to get rid of employer-sponsored coverage and instead shift their workers onto the federal or state exchanges where they can receive subsidies. If more people are on the exchanges and qualifying for subsidies, she said, it could “lift the cost of the law” down the road. “The effect of repealing the law would cost even more than the loss of revenue.”

Related: Top Dem Predicts Employer-Mandate Will be Repealed

Still, many health economists aren’t particularly fond of the employer mandate.

“It’s basically an accounting gimmick to keep the Affordable Care Act deficit-neutral. It ensures a certain number of people achieve coverage through their employers instead of through the exchanges, which means the government wouldn’t have to pay as much in subsidies…but that doesn’t necessarily make it good policy,” Adrianna McIntyre, health expert and managing editor at the Incidental Economist said on BloggingHeads.

That’s because health economists have long advocated for a way to transition people away from employer-sponsored coverage and onto individual policies.

Avik Roy of the Manhattan Institute argued in congressional testimony last July that if enough people moved off their employer-based plans the deficit would actually decrease. He cited a 2012 CBO report that estimated that if an extra 14 million workers moved from their employer-based coverage to plans on the exchanges, the deficit would actually decrease by $13 billion over ten years. “This is because the increase in exchange subsidies is offset by a reduction in lost revenue from the tax exclusion for employer-sponsored insurance,” Roy said.

There have been several efforts from lawmakers on both sides of the aisle to repeal the employer mandate. Rep. Charles Boustany (R-LA) and Rep. John Barrow (D-GA) introduced a bipartisan bill last February to get rid of the mandate by striking the relevant sections of the Internal Revenue Code and the Affordable Care Act.

Similarly, a handful of Democratic Senators all running for re-election in competitive races including Sens. Mary Landrieu, (D-LA)., Mark Begich, (D-AK), Mark Warner, D-VA)., recently introduced legislation that would end the employer mandate for companies with fewer than 100 employees.

"This will enable small and mid-sized businesses to make their own choices for their businesses, and employees can shop for coverage on the individual marketplace," the lawmakers wrote in POLITICO Magazine.

None of these measures has reached the floor in either chamber.

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