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.