Yet another threat to Obamacare: employers evading the mandate

Yesterday, Ed Kilgore wrote that “it’s hard to suppress the feeling that ACA implementation is not going the way it was originally intended.” He was referring to two unexpected developments. One is that many states are refusing to enact the Medicaid expansion provision of ACA, and the other is that a surprisingly large number of states (26, to be exact) are refusing to set up their own health insurance exchanges. This will force insurance seekers in those states to access coverage from a soon-to-be-created federal exchange.

On top of all this, yesterday, the Financial Times reported about yet another threat to the ACA: the attempts of many employers to evade the Act’s health care mandate. As Barney Jopson and Alan Rappeport wrote:

US retailers and restaurants chains that employ millions of low-wage workers are considering cutting working hours or paying fines rather than enrolling employees in health insurance plans under Barack Obama’s landmark healthcare law.

Why are they doing this? It’s simple: the Kaiser Family Foundation estimates that “the average annual cost to employers of insurance is $4,664 for a single worker and $11,429 for a family.” On the other hand, the annual fine for failing to pay for coverage is a mere $2,000 per employee.

In some cases, employers may not even be required to pay a fine. The law doesn’t require coverage for part-time employees, nor does it apply to small businesses (which are defined as workplaces with 50 or fewer employees). So some employers are cutting back employee hours and/or staffing levels to avoid the fine.

At this point, it’s hard to say how widespread employer attempts to evade the mandate will be. According to recent analyses produced by the Congressional Budget Office, the ACA is expected to cause only “a small reduction in the number of people receiving employment-based health insurance.” But a 2011 McKinsey report found that “the shift away from employer-provided health insurance could be greater than expected.”

It has also been argued (by Doug Henwood, for example) that the long-term effects a collapse in employer-provided health insurance may not ultimately be so bad, since it might ultimately might increase momentum for single payer. But I tend to be distrustful of those kind of “the worse, the better” arguments. Over the past several decades, the continuing deterioration of the economic status of working Americans has tended to lead not to a more robust social democracy, but rather to increasingly intense rounds of right-wing backlash. And in the short- and medium-term, the suffering of many Americans who lose their employer-sponsored health coverage could be enormous.

Overall, I continue to worry about a number of significant threats that still could prevent the ACA from being successfully implemented. But over at Talking Points Memo, sociologist and political scientist Theda Skocpol argues that most of these threats are “being hyped out of proportion.” Skocpol, who has closely studied the implementation of other landmark programs like Social Security and Medicare, points out that in America, there always tends to be massive resistance and “protracted political contention” over these kinds of “expansions of the U.S. welfare state.” But based on history, she does not believe that the ACA will “be permanently thrown off track.” Let’s hope she’s right!

Kathleen Geier

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee