The Good and the Bad in Obamacare’s Mandates

EPI has posted items recently on both the individual mandate and the employer mandate contained in the Affordable Care Act (or the ACA, or Obamacare). The summary version of these posts is simply: individual mandate, good; employer mandate, potentially flawed, not operative yet.

The longer versions follow.

On the individual mandate, we noted that it makes health reform more efficient than it would be without any such anti free-rider provision. And since the GOP hates efficient health reform, they have predictably made attacking it a center-piece of their, um, “strategy” in the most recent fiscal showdown.

On the employer mandate we noted two things. First, the claim that there has been a large shift towards part-time work since the passage of the ACA is just not true. Sure, some employers have cut hours in recent years, but the overall trend is toward a decline in the share of workers who are involuntarily part-time. Second, this failure to see any discernible shift towards part-time work makes sense given that the employer mandate in the ACA has been delayed for a year—meaning that employers will pay no penalty before 2015.1 Of course, this fact doesn’t mean that no employers are cutting hours while falsely blaming the ACA.

What we didn’t mention, but should have, is that the employer mandate in the ACA is awfully poorly designed. It doesn’t ask enough of employers, it creates some bad incentives (like, yes, an incentive to cut hours when it is actually implemented), it doesn’t add much to the overall efficiency of health reform (PDF) and it is too hard to predict (PDF) which firms it is really going to impact. Fixing this should actually be a priority for those wanting health reform to work well—see Jacob Hacker for some ideas on how.

Does the fact that the Obama administration delayed the employer mandate for a year mean that the individual mandate should be delayed too? Nope. Delaying a poorly designed employer mandate makes sense, delaying a necessary anti free-rider provision just would mean millions fewer Americans would be covered, and the cost of covering each of them would almost double.



1. Technically, the incentive to shift towards part-time work could begin in 2014 as the number of full-time workers will be assessed in the “look-back” period in that year. But still, this is a future, not a present problem.