The provision in the Affordable Care Act (ACA) mandating employers of 50 or more employees to offer qualified health insurance has been delayed to 2015. By the myriad of press releases, news articles, and blogs one could believe the delay is cataclysmic to health care reform.
- A Wall Street Editorial called the employer mandate the “heart of his health-care law”.
- Bloomberg News called it a “delay of a crucial provision”.
- A Fox News blog advocated for repealing the provision all together due to the delay.
While the delay can be considered a political chess move in advance of the 2014 mid-term election season, from a policy perspective it is not that big of a deal. Here are 4 reasons why:
1. Been Here Before
There are legitimate concerns about the ACA that do need to be addressed, but the employer mandate delay should not be one of them. We have been here before. On April 14, 2011, Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayment Act of 2011. This bill repealed reporting requirements for employers that pay $600 or more to contractors for work and services rendered. The bill was estimated to generate over $21 billion in tax revenues helping to defray the cost of subsidies for consumers that buy insurance on the exchange earning between 133% and 400% of the federal poverty level. A main reason behind the repeal was pressure from small businesses about the administrative hassle and the burden of this type of reporting.
2. Bird’s Eye View
Based on a Congressional Budget Office report, the financial impact of delaying the Employer Mandate by 1 year is $5 billion dollars. The ACA was set to spend $47 billion in 2014 on Health Exchange subsidies. The revenue from employer penalties would have offset roughly 10% of those costs in year one. The 10 year estimate of the Employer Mandate is $150 billion. In short, a 12 month delay of the mandate represents only 3% of the tax revenue forecasted to be generated.
3. Remember Massachusetts?
Massachusetts implemented its own employer mandate in 2006. The penalties were lower ($295/employee) but it affected many more employers; those with 11 or more employees. Today, Massachusetts ranks 4th highest among all states in the percentage of people with employer based coverage (58%). The national average is 49%. The states ranking higher than Massachusetts are smaller states with higher shares of their population working for larger businesses; Connecticut, Utah, and New Hampshire.
4. The Numbers
As of 2009, there were roughly 307 million Americans. 260 million (85%) had health coverage. Of those with health coverage, 150 million received it from their employer (58%). 95 million (37%) had Public Insurance: Medicare, Medicaid, Tricare, or other public coverage. 15 million (6%) had individual coverage purchased on their own.
- Employer Coverage: Based on a 2011 Monthly Labor Review released by the Bureau of Labor Statistics, the 150 million people with employer-sponsored health care overwhelmingly got it from large employers with 50 or more employees.
- Firms with 50 or more employees represent 70% of all employed workers. 98% of these firms offer health coverage to their employees based on a 2012 employer survey.
- Firms with 11-50 employees represent roughly 20% of all employed workers and offered health coverage to their employees at high rates as well. (87% offer rate for firms with 25-50 employees and 73% offer rate for firms with 10-25 employees).
- So 90% of the U.S. workforce was employed by a firm that offered insurance. 20% actually received coverage from their employer even though it was not mandated. There is a very high likelihood such firms will continue to offer coverage even with the employer mandate delay.
Data from Kaiser Family Foundation
Read Section 1513 regarding Shared Responsibilities for Employers here.