Employer vs. individual: Different mandates, different implications
On July 2, the Obama Administration announced a one-year delay in imposing employer penalties on large employers (50 or more workers) who do not offer affordable coverage to their full-time workers (30 or more hours per week) under the Affordable Care Act (ACA). Some view this employer mandate requirement as a key part of the ACA and the penalties as an important tool for securing employer-based insurance coverage once other reforms to the nongroup market are in place. In addition, some have suggested that it is unfair to leave the individual mandate in place while delaying the employer mandate.
Our analysis shows that the two mandates have dramatically different implications for cost and coverage under reform.
We use the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM), a state-of-the-art microsimulation model, to compare the distribution of coverage under the full ACA, the ACA without an employer mandate, and the ACA without an individual mandate. We show that delaying the employer mandate has almost no effect on overall coverage under the ACA or the distribution of that coverage across public and private sources of coverage. Delaying the individual mandate, however, would significantly increase the number of uninsured compared to full implementation of the ACA. It would also decrease employer coverage.
These findings are consistent with the evidence in Massachusetts, where coverage reforms were implemented beginning in 2006. The delay of the employer mandate will also have little effect on government spending on subsidies or Medicaid, but does result in a slight reduction in government revenue.
Our analysis shows that the principal objectives of the ACA’s coverage expansion can be met without the employer mandate, and implementation of the law should be made considerably easier without it. The individual mandate, in contrast, is a critical component of the coverage expansion in the ACA.
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