Monday, November 18, 2013

The Slow Death of the Employer Mandate

This is University of Chicago economics Professor, Casey Mulligan writing at the New York Times:
... “Massachusetts government lost the ability to manage its hospital regulatory system with discipline and integrity.” He and other legislators concluded that “market-based contracting, organized around managed care, could correct the worst aspects of market failure, not perfectly but far better than regulation.” 
Mr. McDonough describes how Gov. Michael Dukakis’s 1988 law sought to achieve universal coverage in Massachusetts with a legislative package that included a $1,680 penalty (per employee, per year) on employers who did not provide health coverage to their employees. Adjusted for inflation, that would be like proposing a $2,863 penalty in 2006, when Romneycare was passed with a mere $295 employer mandate. 
The Dukakis package passed narrowly, and to gain legislative approval the final law delayed the employer mandate’s implementation by four years. Does that sound familiar? The national Affordable Care Act was passed in 2010, with an employer mandate to begin in 2014. 
Mr. McDonough describes how those four years gave Massachusetts employers time to organize their opposition. Moreover, as 1992 approached, the Massachusetts labor market was weak. Arguably both of these things happened nationally between 2010 and 2013. 
As a legislator, Mr. McDonough met with business executives to respond to their concerns over health reform. He recalls one of those meetings where “sitting quietly through my presentation was the owner of a Domino’s Pizza shop.” The shop owner explained: “I compete against pizza stores that pay everything and everyone under the table. I pay unemployment, worker’s comp, FICA, you name it, and you want to add one more thing that I have to dig up while my competitors pay none of those things? Come on.” 
Mr. McDonough had no reply to alleviate that concern. With a few months to go until the originally scheduled implementation, Massachusetts lawmakers decided to delay the Dukakis employer mandate for three years. It would be delayed two more times and then, in exchange for business community support for a coverage expansion for children, ultimately repealed. 
On the national level, while Congress was not consulted, with six months to go before the originally scheduled implementation, the Obama administration delayed its employer mandate one year. 
Although today Mr. McDonough notes the differences rather than the parallels between the Dukakis law and the Affordable Care Act, proponents of the national employer mandate should be worried that it may be approaching the end of its political life.