The Side Effects of Delaying Obamacare
The Obama administration has decided to delay until 2015 its enforcement of the employer mandate, a provision in its health-care law that requires businesses to provide insurance to employees. Assistant Treasury Secretary Mark J. Mazur announced the change in a statement on Tuesday, noting the administration's concern that businesses won't be ready to comply.
My colleague Chris Flavelle writes that the decision boosts the odds that other groups will be able to win further changes to the law, such as eliminating the excise tax on medical devices. It may also create some stress on the implementation of two other parts of the health law: the individual insurance exchanges and the individual coverage mandate.
The essential challenge with adjusting Obamacare is that it is an interlocking combination of policies. The coverage mandates, for instance, pair with regulations that make coverage more generous and more expensive. Without them, the higher cost of insurance might cause the healthiest to opt out, further raising insurance premiums and creating a spiraling problem known as adverse selection. The employer mandate would have worked in a similar way by relieving pressure on the individual market.
That said, there is a strong case for getting rid of the employer mandate. Employers shouldn't sponsor insurance in the first place, as it masks the true cost of care to employees and creates incentives for over-insurance. It also increases the cost of hiring, locks employees into their jobs, and splits the market for insurance into one for individuals and one for employers, which impedes risk-sharing in the individual market.
The value of the employer mandate is to help smooth the transition to the new law. Employers who would have otherwise covered their employees may now choose to defer those plans a year. That may be especially appealing with the law's new and looming standards for what insurance must cover. Since the individual mandate still exists, however, those employees will now be forced into individual exchanges.
That might be OK if the individual exchanges can handle the additional volume. But this delay -- and it is the second, counting one on exchanges for small businesses -- will raise concerns about the exchanges' readiness. It certainly increases the burden of new insurance applicants.
The Department of Health and Human Services has repeatedly reassured the public that the exchanges will be ready by Oct. 1. But the work ahead remains daunting. And the exchanges have few participating insurers in many areas of the country. That lack of competition becomes a larger problem with more people to insure.
Another issue is that 43 percent of the uninsured don't know they need to buy insurance, according to a newly released Gallup poll. That's approximately 20 million Americans. Some of them might have been covered by next year by their employers -- so this decision adds more work to the Obama administration's incipient effort to educate the public on the law.
The Obama administration's decision needs a warning label: "Side effects from the delaying the employer mandate may include headaches and nausea as the health law is put into place."
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Evan Soltas at email@example.com