Newly elected and passionately kicking off the 114th session of Congress, House Republicans immediately got to work this January doing what they have been doing for the past six years: attacking the Affordable Care Act. But instead of starting off the session with a grandiose vote to repeal Obamacare entirely, something that they have since done, Republicans have decided that it is best to begin by erasing and editing specific provisions of the law. And they are right. There are a great many provisions of the ACA that are misguided, burdensome, and largely unhelpful to the law’s two central goals: increasing the number of insured and lowering health costs. One such provision is the so-called employer mandate, and it happens to be the provision Republicans are trying to reform first. The only problem: their suggested reform is horrendous.
Without question, the employer mandate has without question been one of the most contentious aspects of the ACA. In short, the mandate requires all employers with 50 or more full-time workers to provide their employees adequate and affordable health insurance or else pay a tax-penalty. More specifically, employers with 50 or more workers that work an equivalent of 30 or more hours must provide health insurance to their employees. This insurance is not to cost said employees more than 9.5 percent of their take-home pay and is to cover at least 60 percent of in-network medical expenses. Employers that fail to comply will pay a penalty equivalent to the number of employees multiplied by $2000. A page devoted to the precise regulations of the mandate and calculations of the penalty can be found here.
Yes, the mandate is a regulatory jumble. It is difficult to comply with, demanding to enforce, and painful pay for. So Republicans, the self-proclaimed champions of small business, have developed a solution to save the day. Their solution, as written-out in the Save American Workers Act, is to change the ACA’s definition of a full-time worker from 30 hours a week to 40 hours a week.
Currently, the Kaiser Family Foundation calculates that approximately 95.9 percent of employers with 50 or more full-time workers (as defined by the current 30-hour per week limit) already offer their employees health insurance. But while the employer mandate my only affect 4 percent of the businesses it is targeting, those businesses are impacted in no small way as they tend to be smaller start-ups that already have high costs and also do some of the most hiring and firing. Many restaurants and small businesses have already begun cutting hours and charging more.
Further, the employer mandate is unpopular because it is not crucial to the success of the ACA. The Urban Institute predicts that if the employer mandate were to be repealed in its entirety, only about 200,000 more individuals would be uninsured. While that number may seem like a lot, it is miniscule compared to the roughly 10-12 million uninsured individuals the ACA intended to insure. For this reason, even many liberals have come out as critical of the employer mandate.
The one goal that the employer mandate does achieve, and perhaps the primary reason why the mandate was created in the first place, is funding the rest of the ACA. The mandate is predicted to collect from anywhere between $49 billion and $100 billion to fund many other aspects of the ACA such as its Medicaid expansion. This is the biggest argument against repealing the mandate altogether. Combined with the extra 200,000 individuals it is predicted to insure, many Democrats who passed the ACA in 2010 saw the mandate as being worth its costs to businesses. But as the mandate’s implementation has approached, it has been delayed by the Obama administration twice, and its benefits have begun to seem smaller and smaller compared to its unexpected costs.
Republicans are correct when they say that the 30-hour a week cut-off is keeping many businesses, including some large firms such as Regale Entertainment, from hiring full-time workers as they scramble to avoid paying a penalty when it sets in at the beginning of 2016. They are right when they say that many small businesses feel trapped. What they fail to realize, however, is that shifting the definition of full-time from 30 to 40 hours a week does not only fail to solve the problem, it actually makes it worse.
Republicans claim that by expanding the definition of “full-time worker”, fewer small businesses will be impacted and will be able to hire more full-time employees. But far more employees work 40-hour weeks than do 30-hour weeks. The party of less government regulation just voted to shift a regulatory cliff in a way that will impact more workers, not fewer. Should the Republican’s Save American Workers Act be passed, it is likely that the businesses currently cutting hours to avoid the penalty may expand some hours or hire a few more people. But a new, larger group of companies that previously may have thought it too challenging to cut their workers hours to below 30 will find it much easier to cap hours at 40. The mandate will face the exact same problems, just with a new set of businesses. A new set of businesses holding-off hiring new workers, a new set of workers losing insurance coverage, and a new set of managers struggling to dodge pricy tax-penalties.
Furthermore, the Republican’s plan would drain funding from the rest of the government health care apparatus, which is already sorely underfunded. The Congressional Budget Office estimates that somewhere between 500,000 and a million individuals no longer insured by their employer would seek out insurance through Children’s Health Insurance Program, Medicaid, and subsidized insurance on the exchanges. With less money from tax penalties and more individuals utilizing government programs, the government stands to lose almost as much money as it would if the mandate were repealed.
There are far better ways to reform the employer mandate. One suggestion is to allow employers to give their employees tax-exempt dollars to purchase health care on the exchanges. Currently, the money that employers spend on offering health insurance is tax-exempt, so this plan would allow businesses to choose the cheaper option between offering their own plan or providing their employees tax-free money to purchase their own. So while employers could still be held responsible for making sure their employees are insured, they would have much more flexibility in choosing the means by which to do it. Doing this would also costs the government less money as the workers given money by their employer to get insurance on the exchanges would not be utilizing the government subsidies intended for those getting insurance on their own. Even simply repealing the employer mandate altogether, although it would cost more money than the Republican plan, would actually solve the problems that the Save American Workers Act only makes worse.
But Republicans may now be setting their sites higher. In the beginning weeks of February, House Republicans passed a bill that would repeal the entire Affordable Care Act. Of course, even more so than the employer mandate reform, President Obama will certainly veto this bill. Republicans should continue reforming the ACA through piecemeal legislation that reshapes specific aspects of Obamacare – they should just do a better job of it.
