What the Employer Mandate Delay Says About Obamacare's Dysfunction

Posted: Jul 07, 2013 3:36 PM

The Obama Administration's decision to delay implementation of one of Obamacare's big regulations - the employer mandate - led to some progressives actually cheering. "Delaying Obamacare’s employer mandate is the right thing to do. Frankly, eliminating it — or at least utterly overhauling it — is probably the right thing to do," wrote the Washington Post's Ezra Klein. "In my view, the Administration should have gone further than delaying the employer mandate. They should have also proposed a bill to remove it entirely," writes economist Austin Frakt. Talking Points Memo's Brian Beutler writes, "I think you can make a decent case that the administration is actually doubling down on the most crucial and politically high-valence part of the law."

These have come along with typical blame-Republicans condemnations. If the employer mandate is so bad, why wouldn't Congressional Republicans just team up with Democrats to repeal it entirely, for example?

These critics are largely missing the point.

President Obama promised perfection when it came to the Affordable Care Act. More insurance coverage, better health outcomes, cheaper premiums, and you can keep your health care plan. That last one was particularly key when it came to selling the whole package. "If you like your health care plan, you can keep it" was repeated time and again in the President's PR campaign for the health legislation.

The employer mandate is an incredibly important part of this. Obamacare's structure is set up to incentivize employers to dump health coverage and force their employees onto health exchanges, where American taxpayers, instead of individual companies, will bear the burden of subsidized insurance. The mandate would (fairly heavily) penalize companies with more than fifty employees for pulling a stunt like this. As it stands right now, there will already be a lot of Americans who won't be able to keep their health care plan under Obamacare. Without the employer mandate, however, that would skyrocket.

It could certainly be, on a policy level, the right thing to do! Having health insurance tied up with employment status is the legacy of half a century of regulation and tax carve-outs that have made insurance a valuable carrot for employers to offer employees, but it's resulted in a very dysfunctional health system. John McCain's 2008 health care platform was geared toward unraveling the employer-based insurance system. Back then, however, progressive journalists weren't taking a politician's word at face value. McCain's plan would have seen millions of Americans leaving - voluntarily or not - the employer-insurance system for the individual market, just as Obamacare is going to. An Obamacare without an employer mandate will do much the same.

Neoliberal journalist Josh Barro called Obama's keep-your-insurance promise "Obamacare's original sin":

The latter pledge forced Obama try to do two things at once: keep employer-based coverage for the 45 percent of Americans who have it, while getting coverage to the 17 percent of Americans who don't have any at all... The main stick is the employer mandate: Large employers who don't offer coverage will have to pay a penalty of $2,000 per uncovered full-time employee. This will discourage hiring, encourage employers to limit employees to part-time work, and give small firms an advantage over large ones.

If the employer mandate is weakened, Obamacare would become more expensive to taxpayers but less damaging to the economy and job creation. The health care exchanges would become the increasingly dominant venue through which Americans get insurance.

Barro concludes saying that the American health system would be "better off" if more Americans, voluntarily or involuntarily, became disentangled from employer-based insurance. He's right - but it's unlikely that a system that encourages employers to dump insurance for their employees and push those costs along to the taxpayers is the best mechanism to do so.

Beutler writes that he's puzzled about the following sentiment of Obamacare critics:

Republicans are still committed to the far-fetched objective of repealing Obamacare, and as such have effectively vowed not to work with the administration to fix any of its dysfunctional provisions. To the contrary, the GOP is committed to creating implementation problems where they can, and to making sure existing problems are never fixed, to make the whole program a liability for Democrats.

[E]ven though the policy is fixable, [Republicans think] it should be implemented as is, on schedule, so that the White House either pays a political price for it, or agrees to full repeal.

Well, yes. This also points to the blame-the-GOP critique. Republicans, supposedly, should be co-equal partners in fixing the law's myriad problems, so that the basic mandate-community rating-guaranteed issue structure of the law can function properly - which completely ignores how the law was crafted. Democrats didn't need Republican help with the law. They had a supermajority in the Senate and an outright majority in the House. And that's exactly what happened: the White House and Sen. Baucus cut Republicans out of the legislative process, crafted the thing in conjunction with much of the health care industry, and passed it without any GOP support in the Senate. (Rep. Joseph Cao of Louisiana was the sole Republican legislator to vote for PPACA in either legislative chamber.) Democrats gave the American people Obamacare, and Republicans think Democrats should *fix* Obamacare. Uncooperative? Yes, but cooperation was never a priority for Democrats when it came to crafting and passing the legislation.

Republicans would certainly like the President to pay a political price for the mess of implementation when it comes to something that even Obamacare supporters say is bad policy. "Fixing" the policy would see Republicans helping President Obama break the promise that Americans can keep insurance that they like. It's unlikely they're going to be willing partners in that.

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