• Why don’t employers impose a mandate: Response to readers

    There were some good comments to my post on why employers don’t impose an individual mandate. Below I respond to some of the issues raised.

    Some people have experienced what seems to them to be an employer mandate, and maybe that is possible in some states. But not all employers impose one and the vast majority of large-group programs — which is what I was writing about — operate without issue.

    What is common is for insurers working with small businesses to require a minimum participation level: 75% to 90% is typical, according to Paul Fronstin of the Employee Benefit Research Institute, with whom I emailed about this issue.

    Workers could opt out and as long as they had coverage elsewhere. [T]hey wouldn’t count negatively against the minimum participation requirement because they weren’t uninsured.

    Others said they had no option but to accept coverage, which certainly sounds like a mandate. According to Fronstin, “Small companies often just pay the full cost of employee-only coverage, not really giving workers a choice to opt out.” Again, these are small companies, not the large employers I was talking about.

    Some wrote that they were compensated if they declined coverage. This happens, but it’s not typical and often the payment is a fraction of the premium. It’s less common in the large-group market because, as Fronstin told me,

    In the large group market it’s tough for a large employer to get the right people to opt out.  If only healthy workers opt out it doesn’t save you any money because [such a person] wouldn’t be costing the employer anything to begin with and the employer would lose the token worker premium contribution.

    The reason I focused on the large-group market is because it does function well. It’s stable. And there’s nothing like a uniform mandate, even if there may be something like one for a small subset of organizations. The small-group market, in contrast, does not function well. Mandate-like inducements are attempted to retain a viable mix of risk. This is not a good analog for the exchanges, which are designed to serve tens to hundreds of thousands of individuals per state, in other words, large risk pools.

    I fall back to my original assertion. If the risk pool is large enough and out-of-pocket premium costs are (or are perceived to be) low enough, there is no need for a mandate. This raises the question of how low is low enough? I don’t know the answer, but the large group market gives us a lower bound.

    @afrakt

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    • My wife works as teacher in Oklahoma. They provide insurance, and if you accept it, you get the full premium paid for, ~500$ worth, as employer contribution.

      But if you decline it, to get your own insurance, they only contribute 67$. Which is basically nothing. That’s to me basically coercion, because to turn it down is to voluntary turn down the equivalent of 5200$ in tax free wages per year.

      Same job, same hours, less pay.

      So two choices:
      do we mandate all employers provide insurance (and lower wages)?
      Or do we abandon employer insurance (and raise wages) so people can get individual plans as we improve/fix the individual market?

    • I’ve dealt with the coerced healthcare subsidy since 1969. What I’ve done is refused work as a “captive” employee, always preferring a contract or consultant position that came without benefits but paid about double the hourly pay of the “captive.” Even in Germany, a person can choose to be “freiwillig [un]versichert” and escape half of the gummint theft.

      Of course, if I had a serious health problem, wife, kids [Zorba’s “full catastrophe], I would race to be covered!

      I think coerced, tax-favored health insurance assists in capitalism’s creative destruction. Old, established firms like Woolworth’s, IBM, and even Microsoft, who offer cradle-to-grave coddling, will inevitably lose out to more spartan and nimble eBays, Amazons, Facebooks and Twitters, who go on to attract non-breeding, single, productive, young males.