The Obamacare Employer Mandate Should be Delayed…Forever

Posted: Jul 05, 2013 12:01 AM

The big news this morning is the Treasury Department’s announcement that it will delay for one year provisions of the Affordable Care Act that require employers with more than 50 employees to begin filing regular reports showing they are providing coverage to their workforce (which 98 percent currently do.) With that delay, the penalties for employers who do not offer coverage is also pushed back until 2015.

The reason given for the delay by Assistant Treasury Secretary Mark Mazur was “the complexity of the requirements and the need for more time to implement them effectively.”

Once these rules have been issued, the Administration will work with employers, insurers, and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015.  Real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.

Many have taken this news as the latest signpost in the ongoing train wreck that has been Obamacare implementation. But one can hope that what it actually marks is the White House’s recognition that the employer mandate is simply bad policy.

Indeed, the employer mandate is one of the worst parts of Obamacare. It discourages job creation generally, and because the law makes just a very crude binary distinction between “full-time” and “part-time” workers (rather than judging the size of an employer’s labor force by counting its FTEs) it encourages employers who are near the cut-off to game the system by reclassifying full-time positions as part-time ones.

But worst of all, because the penalties assessed to employers for violating the mandate are based on the proportion of its workforce who end up in subsidized coverage through the exchanges, the mandate creates enormous perverse incentives against hiring the poor or those from working class families. This is absolutely the worst sort of policy you could adopt in the midst of a prolonged jobs slump.

The flip side, of course, is that the reason the employer mandate was adopted in the first place was to avoid incentives for big employers to drop coverage and have their employees go and join the exchanges. Without the mandate, certainly, you would expect to see more of that. To the extent health insurance premiums are subsidized, taxpayers will pick up the difference.

This further put the lie to the notion that Obamacare would “save money.” Of course, it was obvious all along that it would not. Indeed, more than half of the program’s proposed savings evaporated the moment the administration chose not to implement the proposed new federal long-term care insurance program the law would have created, which had the benefit of an attractive 10-year budget score by virtue of the fact that it would have collected premiums for five years before it would start paying out any claims. All of this offers Republicans just enormous fields of political hay to make of the fact that the law will be a net cost, not a net savings.

But all in all, given that Obamacare is the law of the land and isn’t going away, it would be on balance a good thing if the employer mandate is NEVER implemented. The link between employment and health insurance is a ridiculous unintentional artifact of World War II-era labor policy, and it’s incredibly counter-productive. It locks people into jobs they would otherwise leave, and presents enormous incentives to work for ossified large firms or for the government, rather than for small emerging businesses or to just start a business yourself. Cutting the cord between employment and health insurance is a first step toward a more dynamic and productive economy. The employer mandate would preserve that link, which is why the employer mandate should be left to the dustbin.