Politico discusses liberals abandoning employer mandate

Today, I found an interesting article in Politico by Page Winfield Cunningham and Kyle Cheney.  The article suggests that some Democrats as well as most Republicans are interested in passing legislation to eliminate the employer mandate.  The article states

“The rule that businesses with more than 50 full time workers offer them affordable health insurance has been a political headache from the start.”

The article notes that compliance is very complicated and many employers have been slashing work hours to minimize the cost of compliance.  The article then refers to a report prepared by the Urban Institute indicating that eliminating the employer mandate would result in only about 200,000 people losing their health coverage.

In other words, eliminating the mandate would make it easier for employers to operate their businesses and hire employees and that the loss insured people would be relatively small.

I agree with the Politico authors that the mandate should be repealed; however, I believe that maintaining the employer mandate will result in fewer people getting health insurance rather than more.  In addition, most of those who end up with no coverage will be low wage low skilled employees.

Under the law a large employer must offer a basic health plan to all of its full time employees.  The coverage must be at least as good as a bronze plan.  In addition an employer cannot charge an employee more than 9.5% of his wages for employee only coverage.  The employer is not obligated to subsidize premiums for the employee’s dependents.
Here in Memphis, Blue Cross charges $218 per month for a particular Bronze plan with $4,000 deductible and a $6,350 out pocket maximum for a 40 year old employee.  Suppose this employee has a spouse the same age as well as 2 children.  The total cost to cover the spouse & children would be an additional $560/mo.
Suppose the employee makes $20,000 per year or $1,667/mo.  The employer can only charge the employee $158/mo for single coverage thus providing a subsidy of $60.  This permits the employer to satisfy the affordability requirement.
The employee would be responsible for $158 for himself, plus $560 for his family.  His total cost would be $718 per month.
This is an astronomical premium for someone earning $1,667 per month.  It would still be quite high even if the other spouse was earning a similar income.  In addition, since this plan has a deductible of $4,000 the employee will likely find this coverage unappealing as well as un-affordable.
As a result this employee will likely not take the coverage.  In addition, since this employee was offered coverage that met the requirements of the ACA, neither the employee nor his family will be eligible for subsidized coverage on the Marketplace.  Without subsidies coverage on the Marketplace will be just as un-affordable.  This employee will likely end up with no health insurance and will be penalized as well.
By contrast, if the employer did not offer this employee health coverage then the employee would be eligible to get subsidies on the Marketplace.  Suppose each spouse earns about $20,000 annually.  In this case the family could purchase a very similar Bronze plan from the same insurance carrier that would cost the family about $59/mo. compared to $718 above.
The employee could also purchase a Silver plan that also qualifies for benefit subsidies reducing the employee’s out of pocket risk from $6,350 to $1,450.  This plan would be more expensive at around $203/mo but still a bargain compared to $718 per month.
Despite the complexity of compliance employers, will comply because the cost of doing so is significantly less than not offering coverage.  In this case it will cost the employer $60/mo or $720 annually to comply vs paying a fine of $2,000.  The fine, by the way, is an excise tax and is not a deductible business expense making it even more costly than it appears.
Many employers currently offer much richer benefits for their own reasons and will likely continue to do so; however, employers that were never inclined to offer insurance will minimally comply leaving millions of low wage employees with no access to affordable health insurance.

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