On July 2, the Obama administration announced that it would delay implementation of the Affordable Care Act’s “employer mandate” until 2015.
This much-bemoaned provision will require businesses with at least 50 employees who work 30 hours or more a week to provide health insurance to all full-timers. Employers that fail to provide coverage will face a fine.
Administration officials claim they need more time to properly implement the rule and for businesses to “adjust” to the burden.
The delay is good news for American patients. They should hope that it augurs yet more delays in the implementation of Obamacare and leads to the law’s eventual repeal.
The mandate will have devastating effects on the economy. Already, there are reports of smaller firms deciding not to scale up their workforce for fear of hitting the 50-employee threshold and thereby taking on tens of thousands of dollars in new health costs. The mandate will also make it harder for low-income Americans to find work. And firms will be less likely to expand their workforces. It will also be an inevitable consequence of the legislation that there will be more part-time jobs offered at less than 30 hours per week of work.
The delay allows the administration to postpone all these deleterious economic consequences until after next fall’s mid-term elections.
And it’s not the first time the White House has pressed pause on its signature legislative achievement.
In October 2011, Secretary of Health and Human Services Kathleen Sebelius announced she would indefinitely suspend the Community Living Assistance Services and Supports Act, or CLASS Act, a component of the law that would have established a federally chartered long-term care insurance program. The brainchild of the late Sen. Ted Kennedy, CLASS would have gone bankrupt within two decades, according to the Congressional Budget Office.
And earlier this year, the administration pushed back the requirement that Obamacare’s small-business insurance exchanges offer workers a choice of plans.
There are doubtless more Obamacare delays coming.
Perhaps exchanges serving the individual market will be next to get a stay. Starting Oct. 1, consumers are supposed to be able to shop for insurance that would take effect Jan. 1, 2014.
But the construction of these web marketplaces has been plagued with problems. Thirty-four states refused to create one of their own, forcing the federal government to establish an exchange for them or be in partnership with them.
The White House expects seven million people to sign up for the exchanges in the first year. But more than three-quarters of Americans have heard “nothing” or “very little” about the exchanges, according to a Kaiser Family Foundation poll. Officials have tried to respond by seeking partnerships with professional sports leagues and major retailers and earmarking huge sums for advertising the exchanges.
Meanwhile, managers have complained about the difficulty of constructing a functional information technology infrastructure to run the marketplaces.
In January, the chief executive of Connecticut’s exchange said that his team would delay the introduction of about a third of the functions it had originally planned to offer. “I wish we had one more year,” he said.
Last Friday, the administration announced that it wouldn’t verify the income of people buying insurance through the exchanges. Officials will simply accept consumers’ self-reported incomes when determining whether they’re eligible for subsidized insurance. This opens up the floodgates for fraudulent behavior. And we can expect lots of it.
In a recent report, the Government Accountability Office surveyed the exchange landscape and found that “many activities remain to be completed and some were behind schedule.”
The struggles befalling the exchanges don’t bode well for the individual mandate, either.
implementation on Jan. 1, this mandate requires all American adults to secure health coverage or pay a fine. The penalty starts at $95 or 1 percent of taxable income whichever is larger. But it ratchets up every year until it hits $695 or 2.5 percent of taxable income by 2016.
The mandate is hugely unpopular. Just 12 percent of Americans think it should take effect next year.
If the exchanges don’t work or if the coverage they offer is too expensive Americans may opt for the fine and go without insurance.
That would be a disaster for the exchanges. Their financial health depends on lots of healthy individuals purchasing insurance and thereby subsidizing coverage for the infirm.
And recent estimates suggest that the cost of premiums for the healthy are likely to escalate by 50 percent or more above what people are currently paying.
But if healthy Americans flout the mandate, the exchanges will only have higher-cost, sicker customers. Insurers will respond by raising premiums to cover their costs. That will cause yet more people to drop coverage. The process will repeat until the exchanges crumble.
With new delays coming almost daily, Republicans smell blood in the water. House Majority Leader Eric Canter noted that the employer mandate delay “further confirms that even the proponents of Obamacare know it will hurt jobs.” And House Speaker John Boehner added that “this announcement means even the Obama administration knows the ‘train wreck’ will only get worse.”
There’s only one way out: Scrap the law entirely and replace it with smart, proven policies that will actually address what ails America’s health care.
The first step is to change the federal tax code so that individuals can purchase insurance with pre-tax dollars just as businesses can.
This simple switch would foster a competitive health insurance market and de-couple health coverage from employment. In addition, the rules should be changed to allow people to purchase health insurance across state lines. That will further improve the competitive landscape.
Next, lawmakers should expand the availability of health savings accounts.
These tools empower patients to save money pre-tax for health services. Consumers own the contents of their accounts, so they have an incentive to shop smartly for care and can choose insurance plans that suit their unique needs and budget.
To ensure that folks with pre-existing conditions can get affordable care, policymakers should expand funding for high-risk pools. Such a reform would undoubtedly deliver quality coverage to those who need it without raising premiums for everyone else.
Finally, lawmakers should scrap Obamacare’s cost-inflating benefit mandates. Such mandates can hike the cost of basic coverage by 10 to 50 percent and force people to pay for medical services they may not want or need.
The delay of the employer mandate is just the latest sign that Obamacare won’t work. Fortunately, there’s still time to repeal the law and replace it with real reform. One can only hope that sanity will eventually prevail.