FEYMAN: Obamacare mandate delay makes case for other fixes

Ending employer-based insurance would boost hiring and wages

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While the Obama administration may not view it this way, the delay of Obamacare’s mandate for large employers to offer health insurance is great news for the economy, and it may have created an opportunity to make important fixes to the law.

Without question, the employer mandate is one of the most detrimental requirements under Obamacare.

For starters, it doesn’t make much sense to encourage the growth of employer-sponsored insurance any more than we already do. Tax breaks dating back to Depression-era legislation ensure that the cost of employer-sponsored insurance (relatively expensive and overly comprehensive) is paid by workers through lower cash wages. Perhaps more importantly, employer-provided health insurance is responsible for a phenomenon known as “job lock,” in which workers remain in a job out of a fear of losing health insurance.

The mandate’s inefficiencies pale in comparison to the pernicious effects it will likely have on the labor market. Because low-income workers are more likely to be in jobs in which they don’t have health insurance, the mandate would primarily hurt those at the bottom end of the income ladder. In essence, the requirement to provide health insurance increases the minimum wage that employers must pay their workers. As a result, those living at or below the poverty line may see their wages stagnate or drop. Their hours may be reduced, or they may simply lose their jobs.

Not only would the employer mandate affect those currently working, but it would harm those looking for a job. Just as the mandate raises the minimum wage employers pay to existing workers, it increases the cost of hiring additional workers. Those most vulnerable — teenagers (with an unemployment rate of 24.5 percent) and low-skilled workers — would be hurt the most, and would see their job prospects quickly diminish.

With the delay of the mandate, however, comes an opportunity to make important fixes to the law. Though the Treasury Department justified the delay as a “transition period” for businesses to better streamline the employer reporting requirements, it isn’t crazy to think that there may be consensus building among Democrats (and in the administration) that the mandate may not be a great idea. Indeed, a bipartisan bill was introduced earlier this year that would have repealed the mandate.

This may be an opportunity for Republicans to leave a positive mark on the health care system, while saving face by repealing an important part of Obamacare. More important than this, though, the delay offers a chance to fix other parts of the law as well. Paring back the law’s premium subsidies — designed to make newly minted insurance policies less expensive — to 300 percent of the federal poverty line, for instance, would benefit those who actually need help paying for premiums. Loosening or eliminating age-rating restrictions would make policies sold on the exchanges less expensive, enticing more young and healthy individuals to sign up.

These fixes plus a repeal of the employer mandate could even become part of a broader effort to reduce employer involvement in health insurance. Doing so would raise cash wages for employees, and employers, knowing that they’re not on the hook for health insurance, would be more likely to hire new employees. With the administration now willing to at least delay parts of the law, a “delay and fix” approach may be more promising for Republicans than “repeal and replace.”

Yevgeniy Feyman is a Manhattan Institute research associate and co-author of the recent Manhattan Institute report “The Obamacare Evaluation Project: Access to Care and the Physician Shortage.”

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