May 12, 2014 - 5:00pm

Why Obamacare’s Employer Mandate Isn’t Necessary

Senior Editor, Digital Content

Since Obamacare’s employer mandate has been delayed twice and even modified, researchers at the Urban Institute asked, “Why not just eliminate it?”

The answer Linda Blumberg, John Holahan, and Matthew Buettgens came up with is that doing so would remove a few of the barriers holding back employers from hiring, while not significantly reducing the number of people with health plan coverage. 

Here’s a quick refresher. Under Obamacare, employers with 50 or more full-time equivalent employees must offer affordable (defined by Washington) health coverage or potentially pay a penalty. The mandate’s penalty is calculated based on the number of full-time employees, which has been redefined as those working 30 hours or more per week. This has created a perverse incentive to cut workers’ hours and hire more part-time workers. This is already happening in both the private and public sectors.

The report states that eliminating the employer mandate “will remove labor market distortions that have troubled employer groups and which would harm some workers."

For example, employers wouldn’t have an incentive to cut workers’ hours to below 30 hours per week, and those small businesses just under 50 employees would no longer have the employer mandate as a barrier to hiring.

The employer mandate penalizes business for hiring employees. That makes no sense when putting people to work is so critical. By eliminating the employer mandate, we can remove one less burden keeping employers from hiring.

UPDATE: Last month, former White House Press Secretary Robert Gibbs predicted that the employer mandate would never go into effect:

“I don’t think the employer mandate will go into effect. It’s a small part of the law. I think it will be one of the first things to go,” he said to a notably surprised audience.

Follow Sean Hackbarth on Twitter at @seanhackbarth and the U.S. Chamber at @uschamber.

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About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.