THE FOLLY OF HEALTH INSURANCE MANDATES
April 9, 2009
Legislation has been proposed in several states to impose a play-or-pay mandate -- requiring employers either to offer group health insurance or to pay into a government fund that subsidizes health coverage. Thus far, the city of San Francisco and the state of Hawaii are the only governments that have imposed such mandates -- San Francisco, because of a favorable appeals court ruling, and Hawaii because of an exemption from federal law, says Devon Herrick, a senior fellow with the National Center for Policy Analysis.
Employer mandates are a tax on employees, says Herrick:
- Benefits substitute for cash wages in a worker's compensation package.
- If workers are unwilling to forgo wages in return for health insurance, firms are unlikely to offer coverage.
- Forcing employers to provide health benefits to workers who are unwilling to bear the premium costs themselves is tantamount to a tax on labor, forcing employees to accept a health insurance fringe benefit in lieu of wages.
- This doesn't make coverage more affordable, instead, it forces employees to bear the cost -- whether they like it or not.
Employer mandates are limited by federal law, says Herrick:
- Another problem with play-or-pay mandates is that most large employers are exempt; the mandate can be imposed on businesses that purchase health insurance coverage in the small group market.
- However, the federal Employee Retirement Income Security Act (ERISA) precludes state and local governments from regulating the health plans of employers who self-insure — that is, pay their employees' health claims themselves.
- ERISA is the basis for an ongoing court challenge to San Francisco's employer mandate.
- Hawaii is exempt from ERISA because its employer mandate was enacted before the federal law, however, the state still has a significant percentage of uninsured residents, and health insurance is just as expensive as in other states.
Source: Devon Herrick, "The Folly of Health Insurance Mandates," National Center for Policy Analysis, Brief Analysis No. 652, April 9, 2009.
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