The Delay of the Employer Mandate

The late French President Charles de Gaulle is credited with possessing substantial political instincts. He once observed “Since a politician never believes what he says, he is quite surprised to be taken at his word.” President Obama vowed he would “faithfully execute” the laws of the land when he was sworn into office. His actions seem to indicate – regarding his signature health care law – he is going to pick and choose exactly which sections will be implemented and when. In response, de Gaulle might have observed “But of course! You didn’t believe him originally did you?”

With all due respect to the former President of France, many observers in the United States were more than a little surprised on July 2, 2013 when the Administration announced it would delay the Affordable Care Act’s (ACA) employer mandate by a year – making it effective in 2015. In a blog post, Assistant Secretary for Tax Policy Mark Mazur stated that the Administration “has been engaging in a dialogue with businesses … about the new employer and insurer reporting requirements” and “ha[s] heard concerns about the complexity of the requirements and the need for more time to implement them effectively.” As a result, the Administration will delay compliance with the mandate until 2015, but will work with employers, insurers, and other reporting entities to “strongly encourage” them to voluntarily implement information reporting in 2014. The Administration will publish formal guidance soon and clarified that the announcement “do[es] not affect employees’ access to the premium tax credits available under the ACA (nor any other provision of the ACA).”

By itself the delay is not the “death knell” indication that some opponents of the Administration’s singular domestic policy success have indicated. Nevertheless, this most recent delay did not happen in a political vacuum. It is the second significant interruption of the ACA implementation, coming on the heels of the one-year delay of the key functions of the small business insurance marketplaces.

It was remarkable the low key way the Administration released the news about delaying the requirement that employers provide health insurance. Many in the policy community indicate this may mean some really bad potential news about the overall implementation of the ACA. Republicans and some influential Democrats both have warned that implementing the mammoth health care law could be a disaster in waiting. Senate Majority Leader Harry Reid (D-NV) and Senate Finance Chairman Max Baucus (D-MT) have both said that implementation could be a train-wreck if the public was not properly informed about what is coming.

These include:

  • Every state has poor areas. In some states, insurance companies – as profit maximizing institutions – are making economic decisions to not offer coverage. What happens when folks have to buy insurance but there are less-than-competitve insurance offerings?
  • Will the insurance exchanges be up and effectively running as scheduled on October 1, 2013? Will the exchanges be comprehensible
    and accessible?
  • Is it possible for the Administration to implement a complex and dramatic change of this magnitude in the economy of the United States, facing ongoing and massive resistance by Republican Governors and the Republican-controlled House of Representatives?
  • What will the “Invincible” generation of young people – who use little health care – do regarding the individual mandate? Will they buckle down and buy health insurance to help keep insurance premiums reasonable for the rest of society? Or, will this young generation simply pay the arguably de-minimus penalties they will face otherwise?

Implications

Many opponents of “Obamacare” are joyful over the potential meaning of this delay. There is a lot of “I told you so!” going around. One result is that the cost of ACA implementation will go up. According to the Congressional Budget Office, this delay will raise the price of implementation by $10 billion because of the loss of expected penalty payments by employers. However, in terms of political impact, there are other things more significant than the employer mandate just around the corner. Opponents should be watching for an indication in the coming days about other parts of ACA which may implode.

Proponents of the ACA argue that the employer mandate for companies to provide health insurance if they have over 50 employees, was a relatively small piece of the ACA implementation in the first place. They cite the Kaiser Family Foundation, which reports 94 percent of such companies currently offer health insurance anyway. But if the employer mandate was a small piece of the overall ACA rollout, why did implementation have to be delayed another year? The political signal is, the Administration couldn’t figure out how to make it work. To paraphrase Michael Cannon of the Cato Institute, this just adds to the opponent’s argument that Obamacare “is premised on the fatal conceit that government experts can direct the market better than millions of consumers making their own decisions.”

There are arguments made that the employer penalties will perversely incentivize employers to drop insurance and send their employees to the health insurance exchanges. Also, the Administration has included a somewhat strange cut-off for the employer mandate that activates if an employee works 30 hours or more a week. Businesspeople I have talked with say that their colleagues in the business world are scrambling to get their employee base below 50 if possible and to limit the working hours to 30 per week for as many employees as they can. These employees, the argument goes, are low to moderate income individuals, most of which would qualify for subsidized insurance on the exchanges.

Ironically, the Obama Administration is seemingly freeing the employers from their mandate to provide health insurance while keeping in place the mandate for individuals to obtain health insurance or face tax penalties if they do not. Experience in Massachusetts, where state-wide universal coverage has been in place for a while, indicates that during implementation employers did not drop insurance coverage for their employees. As a matter of fact, the number of Massachusetts employers offering health insurance actually went up. And the tax penalties in Massachusetts are substantially lower than those included in the ACA.

Society is complicated and certainly as a subpart of our ongoing societal endeavors, health care is about as complicated an issue as there is. However, there is a larger issue here. President Obama took an oath to faithfully execute the laws of the land. Some of our founding fathers thought this so important that they actually included it in Article II of our Constitution. How then does the President unilaterally suspend parts of his own health care law? In his defense, Obama is not the only President that has stepped outside the Constitution he swore to upheld. Attorney General Philander Knox, once responded to President Theodore Roosevelt requests that he concoct a defense for America acquiring the Panama Canal Zone. “Oh, Mr. President, do not let so great an achievement suffer from any taint of legality!”

Every time the President or his supporters rail against the “obstructionist” Congress, it is easy to nod one’s head. The House of Representatives has been particularly obstructionist with this particular issue. However, opponents have a point when they counter that the ACA – which they unanimously opposed and still oppose – shifts unlimited power to the unelected bureaucracy. Furthermore they argue, it is so unworkable that the Administration has to roll back or ignore pieces of the law. Credence has been given to like Republican and Democratic concerns that the Presidents’ health care law is a logistical mess.

Woody Allen once observed “If you’re not failing every now and again, it’s a sign you’re not doing anything very innovative.” President Obama is trying. The bureaucracy is trying. Congress is trying. Failing at parts of the implementation timetable – like the employer mandate delay – is not the end of ACA. Near universal coverage remains the law of the land. However, this delay taken in context is very troubling in light of the scheduled complicated pieces of the law which are supposed to roll out shortly.


Robert Betz, Ph.D., is President of Robert Betz Associates, Inc. (RBA), a federal health policy consulting firm located in the Washington, D.C. area. Additionally, Dr. Betz is an adjunct professor teaching at The George Washington University where he specializes in political science and health policy. For more information about RBA, visit www.robertbetz.com.

Robert Betz Ph.D. About Robert Betz Ph.D.

Robert Betz, Ph.D., is president of Robert Betz Associates, Inc. (RBA), a well-established federal health policy consulting firm located in the Washington, D.C. area. Additionally, Dr. Betz is an adjunct professor teaching at The George Washington University where he specializes in political science and health policy. For more information about RBA, visit www.robertbetz.com.

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