News from the Obama administration about the employer mandate in the Affordable Care Act caused quite a stir last night, but it’s worth pausing to appreciate the extent of the impact.
In a significant setback for President Obama’s signature domestic initiative, the administration on Tuesday abruptly announced a one-year delay, until 2015, in his health care law’s mandate that larger employers provide coverage for their workers or pay penalties. The decision postpones the effective date beyond next year’s midterm elections. […]
While the postponement technically does not affect other central provisions of the law – in particular those establishing health insurance marketplaces in the states, known as exchanges, where uninsured Americans can shop for policies – it threatens to throw into disarray the administration’s effort to put those provisions into effect by Jan. 1.
Well, maybe. Let’s back up and recap what this policy is all about, because I think some of the reactions to the one-year delay have been a little excessive. Maybe it’ll be easier to tackle this in Q&A form.
* What’s the employer mandate? In practical terms, the policy name is a bit of misnomer – there is no actual “mandate.” Under the Affordable Care Act, businesses with 50 or more full-time employees are told they need to offer health care coverage to their employees, but those who choose not to offer coverage have to pay a fairly modest tax penalty. As of last night, that penalty won’t kick in, at the earliest, before 2015.
* Won’t this mandate discourage those businesses from hiring? It’s been an important part of the criticism, but Obamacare extends all kinds of breaks to these employers to help subsidize the insurance and soften the blow of increased costs.
* So is it a good policy or a bad policy? Opinions vary, of course, but plenty of folks, including some center-left health care advocates, have never been crazy about the idea, and see alternative approaches that can help reach the same goal.
* But if the policy is delayed, won’t that mean a whole lot of Americans won’t get coverage until 2015? The problem is with the “whole lot” part of the question. The vast majority of employers in this category (about 96%) already offer health insurance to their workers, and the delay won’t affect them at all. What’s more, the delay won’t affect the creation of the exchanges, which should help bridge the gap – folks working for businesses that don’t offer coverage will still be eligible for subsidies they can use to buy insurance in their state marketplace.
* But what if the exchanges aren’t ready in time? Well, that would be a bit of a problem. The fact that most of the nation’s Republican governors still hope to sabotage the law and deny Americans coverage has forced officials to scramble and there is an open question about whether the marketplaces will be ready in time.
* If these affected workers are going to get subsidized coverage through the exchanges anyway, why have the policy at all? Primarily, the employer mandate helps pay for the Affordable Care Act. In fact, with the policy delayed, Obamacare will still reduce the deficit, but by about $4 billion less than previously estimated. [Update: I forgot something important on this. The mandate was also created to discourage employers that already provide coverage from dropping their employees and throwing workers into exchanges. That said, few argue that this delay will change the status quo in any meaningful way.]
* Does yesterday’s announcement have anything to do with the individual mandate we’ve heard so much about? No, that’s something different, and it remains very much in place.
* Who benefits from the delay? As a political matter, Republicans are crowing about implementation troubles, but as a substantive matter, this appears to be a win for employers who’ve complained bitterly about the measure. In fact, the U.S. Chamber of Commerce has said repeatedly that this provision is discouraging private-sector hiring. (I rather doubt that’s true, but if it is, these employers should start hiring more in light of the newly announced delay.)
* If the provision is proving to be somewhat troublesome, why not replace it with an alternative provision? Plenty of reform proponents, including some credible folks on the left, would be happy to do this, but it would require Congress to work on a solution – and Congress is such a mess it can’t do much of anything anymore. In particular, congressional Republicans don’t want to correct Obamacare’s glitches to benefit consumers and employers; they want to destroy the law and go back to the dysfunctional mess that existed before.
* Does the Obama administration have the authority to simply delay implementation of part of the law unilaterally? Apparently so. Ideally, the White House would work with Congress on something like this, but again, Congress no longer functions so the administration is using its regulatory authority, effectively telling the IRS, “Don’t enforce this part of the law.”
* So what’s the bottom line? The newly announced delay doesn’t look good, and arguably causes the White House some political troubles, but as Jonathan Cohn explained, “In short, delaying the employer mandate probably won’t do much damage to the law’s basic goals – making health insurance more available and, over time, containing the rise of health care costs.”