Wednesday, June 4, 2014

Yet Another Prominent Obamacare Supporter Argues Against the Employer Mandate

This is from Professor Timothy Jost writing at the Health Affairs Blog.  Professor Jost's post is very long and goes on to talk about different ways the government could get involved in compelling employers to provide healthcare.  That discussion is largely theoretical in light of the political divide in Washington, D.C.  Below I've excerpted his arguments against PPACA's Employer Mandate.  This is significant as he has been one of Obamacare's most vocal and prominent defenders.  He is now the third, prominent such person/group to come out against the employer mandate in the last year (Urban Institute, Ezra Klein and now Prof. Jost).  You can read his entire post here.  
... The employer mandate ... is resulting in a host of problems. To begin, implementing the mandate has proven to be an incredibly complex task. As already noted, the mandate only applies to large employers, those with at least 50 full-time or full-time equivalent employees. But an employer’s number of employees is not always easy to count, and the 50-employee threshold seems quite arbitrary. 
Second, employers are only required to insure full-time employees. The ACA defines a full-time employee as one who works at least 30 hours a week. But workers’ hours often fluctuate. And while counting hours can be fairly straightforward for hourly wage workers, it is more difficult for salaried workers. For many employees — adjunct faculty, seasonal farm workers, airline pilots, or high school coaches, among others — counting hours makes little sense at all. 
The ACA allows employers to impose a waiting period of up to 90 days before covering workers. But determining when the 90 days begins to run is sometimes itself complicated — for example, when an employee moves from part-time to full-time status. To make the law work, employers must report to the federal government and to their employees a great deal of information regarding the health benefits they offer and to whom they are offered. Employers will no doubt spend hundreds of thousands of hours compiling this information and the government thousands more hours processing it. 
The employer mandate is also already having an effect on business arrangements and on the labor market, although the full extent of this effect is difficult to know. Small employers approaching the 50-employee threshold have reportedly constrained growth to avoid becoming subject to the mandate. Some employers have cut the hours of part-time employees to below 30 to avoid having to offer them coverage. Other employers have reportedly dropped coverage for spouses of employees who had access to other coverage, as the rules implementing the mandate do not require spousal coverage. 
Despite all of this, it is not even clear that the employer mandate will actually result in decent coverage for employees. To avoid the $2000-for-every-full-time-employee penalty, employers need simply offer “minimum essential coverage.” “Barebones” coverage, however, which pays for preventive services and does not violate other specific provisions of the law, qualifies as minimum essential coverage. Employees who accept “barebones” minimum essential coverage are exempt from the individual mandate penalty and thus need not obtain real insurance, even though they are effectively uninsured. 
If an employer additionally offers adequate coverage (with at least 60 percent actuarial value) that is affordable (can be purchased for 9.5 percent or less of an employee’s wages), the employer escapes all penalties, even if not a single employee accepts coverage. If an employer fails to offer coverage to a low-income employee, moreover, and that employee ends up on Medicaid, the employer suffers no consequences. 
It gets worse.  Because the ACA is built on the assumption that individuals with employee benefits have coverage, it prevents individuals who accept employer coverage — however barebones and inadequate — from qualifying for premium tax credits and cost-sharing reduction payments. Even an offer of “adequate” and “affordable” coverage can disqualify individuals from tax credits, whether or not it is accepted. Indeed, the offer of affordable individual employer-sponsored coverage to an employee disqualifies the employees’ entire family from subsidized exchange coverage, even if family coverage is clearly unaffordable. 
Individuals are required by the individual mandate to purchase health insurance, but if employer coverage is unaffordable (costs more than 8 percent of household income), they are exempted from the requirement. But the tasks of determining whether an individual should be exempt from the mandate because employer-sponsored insurance is not affordable, or whether an individual is eligible for premium tax credits because employer-sponsored coverage is unaffordable or inadequate, add greatly to the work of the exchanges. 
The Administration’s response. Not surprisingly, the administration has delayed enforcement of the employer mandate as it struggles with its complexities. Unable to figure out how to implement the employer reporting requirement, it announced in the summer of 2013 a delay of both the employer reporting requirement and the mandate itself until 2015. The administration subsequently announcedthat employers would only need to achieve 70 percent compliance for 2015, while also delaying the mandate for employers with between 51 and 100 employees and required coverage for dependents until 2016 under certain circumstances. Even after 2016, the final regulations implementing the mandate require only 95 percent, rather than full compliance. ... 
Why not just repeal it? If the employer mandate is so problematic, why not simply repeal it? One obvious argument against repeal is that without the mandate employers will drop coverage, leaving their employees uninsured or forced to seek tax-subsidized coverage through the exchanges. This will impose greater costs on the federal government and on employees themselves.  
There are good reasons to believe, however, that most employers would continue to provide coverage in the absence of the mandate. The vast majority of employers subject to the mandate offered coverage before it went into effect (99 percent of employers with more than 200 employees and 91 percent of employers with between 50 and 199 employees). Health benefits have long been regarded as essential for recruiting and retaining skilled and competent employees, and they contribute to increased productivity and reduced absenteeism. Employer coverage can usually be provided with lower administrative expenses than individual coverage, and thus provides good value for employers and employees. 
Perhaps most importantly, employment-based benefits are already heavily subsidized through the tax system. They are exempt for both the employer and employee not only from the federal income tax, but also from Social Security, Medicare, and federal unemployment tax, as well as state income tax. The employer mandate penalties impose only a marginal additional incentive to obtain coverage. ...