Repealing Employer Mandate Would Weaken Job-Based Coverage, Increase Uninsured

The House Ways and Means Committee will consider budget reconciliation legislation this week to repeal health reform’s requirement that employers with more than 50 full-time-equivalent (FTE) employees provide affordable, comprehensive coverage to their workers or pay a penalty.  Without this requirement, some employers, particularly relatively smaller ones, may stop offering coverage that their lower-income employees can afford — or stop offering coverage altogether.  As a result, eliminating the requirement would erode employer-sponsored insurance and increase the ranks of the uninsured.

• The employer responsibility requirement bolsters job-based coverage.  Beginning in 2015, employers with at least 100 FTEs must offer affordable, comprehensive insurance to their full-time workers or pay a penalty.  In 2016, the requirement applies to employers with 50 FTEs or more.  It’s designed to strengthen employer-sponsored insurance — still the primary source of coverage for non-elderly Americans — by encouraging firms that offer coverage to continue doing so and encouraging firms that don’t offer coverage to start.

So far, it appears to be doing just that.  A just-released survey finds that in 2015, 21 percent of employers with 100 or more FTEs expanded eligibility to include more workers and 5 percent now offer more comprehensive benefits to some workers who had received only limited benefits.  (Also, the provision hasn’t caused employers to shift more of their workforce to part-time status, contrary to critics’ predictions.)

• Repeal would undercut historic progress in reducing the ranks of the uninsured.  The uninsured rate fell sharply in 2014 and the number of uninsured dropped by 8.8 million, new Census Bureau data show.  By far the largest single-year reductions on record in data back to 1987, these gains primarily reflect health reform’s major coverage expansions, which took effect last year.  Other government and private surveys show more gains in 2015. 

The Congressional Budget Office (CBO) — which estimated in 2013 that delaying the employer responsibility requirement by one year would leave 1 million fewer people with employer coverage (about 500,000 of whom would end up uninsured) — warned that repealing the requirement would likely cause even more people to become uninsured, relative to current law.  That’s because employers would more likely end health insurance benefits for their employees if the requirement were repealed rather than postponed. 

• Repeal would be costly.  If fewer employers offer coverage over time, more people will be eligible for publicly funded coverage, such as Medicaid, the Children’s Health Insurance Program (CHIP), or marketplace subsidies.  CBO estimated  that the one-year delay in the employer mandate would generate a net federal cost of $12 billion due to higher costs for Medicaid/CHIP and marketplace subsidies, plus forgone penalties related to the mandate.   Repeal would cost even more, CBO estimated, because more employers would no longer offer coverage as a result.  The RAND Corporation previously estimated that repeal would cost $149 billion over ten years.