Postponing employer mandate makes Obamacare more vulnerable
Mackinac Center analysts have argued that if Michigan legislators adopt the Obamacare Medicaid expansion it reduces the likelihood of this vulnerable law being amended next year, perhaps in ways that significantly reduce the harm we believe it will cause.
The case for no expansion became much stronger recently with the Obama administration’s decision to postpone enforcement of the law’s “employer mandate.”
The Cato Institute’s Michael Cannon and others have raised questions about the administration’s legal authority to delay employer penalties. A Wall Street Journal editorial (“Employer Mandate? Never Mind”) connected that dot with potential political and legislative responses that suggest a very substantial impact on the law’s overall prospects:
Which brings us to the dubious legality of this delay… President Obama probably figures business and Republicans won't object because they don't like the law anyway. But Republicans should give Mr. Obama the legal authority to suspend the mandate — in return for other concessions. In addition to forcing votes on suspending the individual mandate-tax, this could include repealing the medical device tax and other harmful provisions. Democrats will find it hard to defend an individual mandate-tax now that businesses are spared. And a delay of one year can easily become two, then three, and then past the next Presidential election…the task for opponents is to press the concession and begin to delay the rest of the law and dismantle it piece by piece.”
Cato's Cannon explains how without the employer mandate Obamacare's internal structure begins to crumble :
Implementing the law without the employer mandate will definitely be very chaotic. How can the federal government determine eligibility for the law’s subsidies if it doesn’t know whether workers received an offer of adequate coverage from an employer? Will the delay cause even more employers to drop coverage? Will it lead to some workers not receiving subsidies who otherwise would? Will employers’ and workers’ responses to the delay affect the risk profile of those who seek coverage through the exchanges? If so, how will that affect insurers, who have already filed their rates based on the assumption that the employer mandate would be in place? Will this delay lead to more delays, and ultimately to repeal? Will it increase political pressure for repeal of the individual mandate? The whole purpose of the employer mandate was to reduce the economic and political upheaval that the rest of ObamaCare will unleash.
Finally, the possibility of Congress enacting substantial Obamacare changes next year have greatly increased for a reason explained by American Enterprise Institute Scholar James C. Capretta and others. Capretta wrote:
The administration’s announcement made no mention of changing the enforcement schedule for the ‘personal responsibility requirement.’ So, with the delay, employers are under no obligation to offer insurance to workers but the IRS can still impose a tax on workers who don’t have qualified insurance in 2014. The Obama administration therefore wants to let big businesses off of the hook but not hard-pressed working families. How do Democrats defend that position? And how do they vote against a bill to delay the individual mandate?”
But a few writers on the center-left — such as Josh Barro of Business Insider and Ezra Klein of the Washington Post — are saying what I’m thinking: Obama ought to kill the employer mandate altogether. The left-right agreement comes from the observation that employer-based health-insurance is an odd and not terribly efficient biproduct of bad New Deal legislation.
All of which reinforces the question for Michigan Republican lawmakers who have often condemned the “Affordable Care Act" and called for its repeal. Why in the world would you authorize a Medicaid expansion that further entrenches the law at the very moment when its wheels may be starting to fall off?
Update: Health care policy expert Avik Roy, reporting that the feds will use the honor system to determine the eligibility of individuals claiming means-tested insurance subsidies on the health care exchanges, because they can't make Obamacare's income verification scheme work in time:
As I go back and forth on Twitter with a few people, it becomes clear that a key ramification of this announcement is what it means for uninsured people who were slated for Obamacare’s Medicaid expansion, who live in states that don’t expand Medicaid. Effectively, states no longer need to expand Medicaid, because this newly Medicaid-eligible population can now sign up for the exchanges, at no cost to the state, and know that their incomes won’t be verified by the IRS (because their incomes are too low to file tax returns).
That is to say, if your income is at 90 percent of the federal poverty level, and you live in Texas, where the state isn’t expanding Medicaid, all you have to do is write on the form that your income is actually 105 percent of FPL, and magically, you qualify for the exchange. I could easily envision certain activist groups signing people up for coverage this way. The upshot is that it could dramatically increase exchange subsidy spending, but also lower pressure for the Medicaid expansion.