• Who needs the employer mandate?

    So, the employer mandate is delayed a year. Why not make it two, three, or infinitely more?

    Years ago, I wrote many posts questioning why we should want to encourage the continuation of employer-based health insurance (ESI). I know of no economist who likes the idea of wedding health insurance to employment. It distorts employment decisions. It suppresses small business creation. It obfuscates compensation. It decreases individual choice. It reduces revenue under our tax code, which exempts the premium of ESI from payroll and income taxes. That preferential tax treatment also encourages overly generous coverage.

    An employer mandate helps support all these terrible things. Why would we want one?

    The only reason I can imagine for wanting an employer mandate is that it may be, superficially, net revenue positive. That is, the cost of exchange subsidies may be higher than the value of forgone taxation of ESI, less any revenue collected from the employer mandate penalty itself. However, once you factor in the other benefits of severing the link between employment and health insurance, it may be a far better world without the mandate, and a better one still without the preferential tax treatment of ESI.

    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, along with capping or removing the preferential tax treatment of ESI. I’d also like everyone to have access to subsidized exchange coverage. It may even be possible to make some version of a combination of these be revenue positive, but I haven’t tried to run the numbers. Of course, such a proposal would ignite a political firestorm. Perhaps only economists would be smiling.


    • I think the employer mandate was largely added to bolster the administration’s claim that the ACA would let anyone who is happy with their health plan keep it. One of the major criticisms from the right was that under the ACA employers would dump coverage. Just look at this propaganda from Heritage: http://blog.heritage.org/2012/07/27/what-are-the-odds-your-employer-will-drop-health-coverage/ First sentence: “President Obama promised reform would not affect existing coverage. While it remains uncertain exactly how many Americans will lose coverage, studies show it will be millions.”

      Basically, the problem is that despite all the problems with an employer-sponsored system, most people are actually fairly happy with their insurance plans: http://www.gallup.com/poll/102934/majority-americans-satisfied-their-own-healthcare.aspx
      I would therefore not count it likely that the ESI system will ever be reformed–any policy change that ends employer-based coverage has a stealing-candy-from-children appearance that politicians don’t want to deal with.

      • “I think the employer mandate was largely added to bolster the administration’s claim that the ACA would let anyone who is happy with their health plan keep it. One of the major criticisms from the right was that under the ACA employers would dump coverage.”

        I think that’s absolutely true.

        And there are a lot of lucky bastards who still get decent health insurance because they have decent jobs that offer it. And they’re scared shitless that they’re going to have *gasp* have to pay taxes on that income… or even worse *omg* wind up like many of us who have lived without any coverage for 5 years.

        They can’t think beyond their selfish good fortune to any greater good. They want to greedily keep what they have while the rest of us suffer & die early.

        /end rant

        Sorry, it just drives me crazy when people assume because me & my spouse work full time hours, we must be “one of them” … you know the people we used to be with employer sponsored health insurance.

        We’re not.

        And at our age in this economy with current health care & health insurance costs, we probably never will find another employer offering health insurance willing to hire us.

        Divorce it from employment entirely.
        I think there should be a mandate law under penalty of huge fines and imprisonment, forbidding employers to use health care as a benefits wage package.

        I was sick & tired anyway having employers stick their nosy parker noses into my health care.
        When you think about it, it’s pretty creepy that your employer gets to decide a bunch of stuff about how you manage your health care.

    • “That preferential tax treatment also encourages overly generous coverage.” I see this argument made quite a bit, but it’s always an assertion and never specific. What is overly generous coverage? Hospitalization? What payments shouldn’t health insurance cover to stop this dread overly generous coverage?

    • I can’t believe that I am agreeing with you.

    • One of my conservative heros – Winston Churchill – opted for national health insurance because he felt it would make British companies more competitive in world markets. I would love to see a good analysis of how going to a national single payer health plan would affect profit margins of US firms.

      That aside, this will probably get very ugly…

      1. Under what authority does the government delay implementation of just one aspect of a law?

      2. Who in the end wins the mid-term elections will have a significant impact on the chance of an effort to repeal/replace – that will be interesting to follow.

    • I’m not buying the idea that the tax treatment of ESI supresses small business creation. There are millions of small businesses out there. Sounds more like common theory than facts

      • I know a number of people who’ve started companies. One commented that insurance was very expensive as a start-up or an individual, so they could only employ people who were covered under their spouse’s plan, were clueless (ie were bros who did without insurance), or who had COBRA and if the start-up didn’t provide insurance before the COBRA ran out, the employee quit.This is frequently mentioned as a difficulty with start-ups.

        Obviously, the issue depends on the industry. Industries with industry groups that provide insurance or industries where the big competition is lousy at insurance might not have the problem.