NCPA - National Center for Policy Analysis


March 31, 2009

Employer mandates, a staple of Democratic health care reform proposals, require employers to either offer insurance or pay into a fund for worker coverage.  But some stakeholders and Republicans fear that the mandates give government too much power to increase the burden on employers later on, and leverage low prices from doctors and hospitals that make it hard for private plans to compete.

What is the biggest mistake that policy makers could make when it comes to employer mandates?  What have we learned from the employer mandates in Massachusetts, and what could make these mandates a deal-breaker for reform, asks the National Journal?

According to John C. Goodman, President and CEO of the National Center for Policy Analysis, a mandate on employers, similar to one proposed by the Commonwealth Fund and endorsed by Barack Obama during the campaign, would be very bad.  For example:

  • A tax on wages of 6 percent up to $1.25 an hour, in lieu of health insurance, pretends to be a burden for employers; in fact it would be a tax on labor.
  • If combined with the opportunity to buy insurance in an external Exchange at no more than 10 percent of income, it would cause the current employer-based system to unravel.

Employers would drop their coverage in droves, says Goodman.  They would pay the fine and give workers the remainder in taxable wages.  Workers would then have the opportunity to buy their own coverage on the cheap.

Everyone would game the system and the loser would be the taxpayer.  Ironically, the number of uninsured might go up, not down, explains Goodman.

Source: John Goodman, Response to "The Do's And Don'ts Of Employer Mandates," National Journal, March 30, 2009.

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