Almost no one wants the Obamacare employer mandate now: Here's why

By Noam N. Levey

July 28, 2014 6:43 PM PT

Reporting from Washington — When President Obama signed the Affordable Care Act, its requirement that large employers provide health coverage or pay a penalty seemed to many supporters a key pillar of the effort to guarantee health coverage to Americans.

Four years later and after repeated delays, the so-called employer mandate has become something of an orphan, reviled by the law’s opponents and increasingly seen as unnecessary by many of its backers. Twice in the last two years, the Obama administration has put off the penalties, citing difficulties enforcing the mandate.

House Republicans plan to sue the president, largely over his suspension of the mandate, saying he has broken the law by failing to enforce a requirement that they bitterly oppose.

That’s only one of the ironies in the debate over this part of the health law: The center of a potential constitutional clash between the House and the White House is a program that many in both parties would just as soon see go away. The House could vote to approve the lawsuit as early as this week.

Backers of the Affordable Care Act list the employer mandate as among the provisions of the complex law that they hope could be revised when healthcare becomes less politically explosive.

“A few years down the road, there may be opportunities to revisit parts of the ACA and improve them. That would be nice to contemplate,” said Paul N. Van de Water, senior fellow at the Center on Budget and Policy Priorities, a left-leaning Washington think tank. “We are not there yet.”

The employer mandate is designed to prevent businesses from dropping health benefits now that the government provides subsidies to help low- and moderate-income Americans buy coverage. Democrats who wrote the law worried that companies would be tempted to stop offering coverage, shifting the cost to taxpayers.

Large employers that do not provide insurance are supposed to pay a fine — called an employer responsibility payment — of $2,000 per employee above the first 30 employees. Employers may be subject to even bigger fines if their employees cannot afford the coverage offered at work and then qualify for government subsidies to buy coverage on their own.

But over time, the mandate has drawn increasing criticism, even from the law’s supporters.

By contrast, most experts see the law’s other well-known mandate — the requirement that most Americans have insurance or pay a penalty — as far more central to the law.

“The employer mandate is not an essential feature of the Affordable Care Act,” said Dr. Bob Kocher, former special assistant to the president for healthcare and economic policy. Kocher worked extensively on the law in 2009 and 2010.

“The best course now would be to forego it as long as job growth remains slow, few employers drop coverage, and Americans who can’t get insurance at work can find it on the marketplaces created by the law,” he said.

Support for the employer mandate has faded in part because employers have continued to offer benefits, even without a penalty.

In fact, recent surveys have suggested that there has been a gain in employer-based insurance this year.

“I think there was more angst than warranted that if you didn’t have an employer mandate … that all the employers would drop coverage. That’s just not happening,” said Linda Blumberg, a senior fellow at the Urban Institute.

The institute recently concluded in a study that dropping the mandate would have a minimal effect on insurance coverage nationally.

Kocher and other health law supporters nonetheless caution against scrapping the mandate altogether, noting that it may become a more important tool if more employers drop coverage or if workers can’t find affordable insurance on their own.

There is little chance, however, that the employer mandate will be repealed any time soon.

The penalties on employers that don’t offer coverage are slated to generate more than $100 billion over the next decade, according to the nonpartisan Congressional Budget Office. That money, which pays part of the cost of expanding health coverage, would be difficult to replace.

Neither the president nor Senate Democratic leaders have signaled any interest in reopening debate about the provision. Last week, the administration finally unveiled proposed forms employers will have to fill out next year.

“This part of the law is rooted in support from Republicans, Democrats and business owners over the past several decades because it helps people access health insurance, saves taxpayers money and levels the playing field,” White House spokeswoman Jessica Santillo said.

Mary Kay Henry, president of the influential Service Employees International Union, said the penalties on employers that don’t offer coverage remain vital.

“The employer responsibility mandate is a way to make sure every individual and every employer does the right thing,” she said. “This is a very transformative law, and we need to stop talking about picking it apart. We need to stay all in.”

The mandate directly affects only a small slice of Americans. The health law has always exempted businesses with fewer than 50 full-time employees, which accounts for about a quarter of the U.S. workforce.

The vast majority of larger businesses already provide coverage: 99% of employers with more than 200 workers offer health benefits, according to an annual survey by the nonprofit Kaiser Family Foundation and the Health Research & Educational Trust.

But the additional reporting requirements integral to the mandate have made it deeply unpopular with business groups.

Even supporters of the law acknowledge that because the requirement applies only to employers with 50 or more full-time workers, it creates an incentive for employers to move some people to part-time work.

Although there are only scattered reports of this happening so far, businesses are reviewing the option as they make plans for 2015, when the requirement is scheduled to be phased in, said Mike Brewer, president of Lockton Benefit Group, a leading benefits consulting firm based in Kansas City, Mo.

“It is very scary for a lot of them,” Brewer said.

Unless the Obama administration delays them further, the penalties are scheduled to go into effect next year on employers with more than 100 workers. The administration plans to impose penalties on employers with more than 50 full-time workers beginning in 2016.

Neil Trautwein, vice president of the National Retail Federation, whose members have fiercely opposed the mandate, said few businesses are banking on another delay.

“I expect the Obama administration would rather crawl across broken glass than issue another delay,” he said, noting the political controversy such a move would spark. “Most employers are resigned to the fact that the mandate will be here and be here for a while.”

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