Kansas State University


Issues in Health Reform

How the Marketplace works even in spite of delayed employer mandate

Much has been made about the Obama administration’s recent decision to delay till Jan 1, 2015 the implementation of the employer mandate (requirement that all businesses over 50 full time employees provide adequate and affordable health insurance to their workforce).  This thoughtful piece from Wendell Potter (former insurance company CEO) of the Center for Public Integrity states well how this issue is being overblown from the perspective of having insurance available for citizens.  Many believe that the Marketplace will be ready to open in October for plans to begin January 1 and it is that marketplace that offers new potentials for consumers:  anyone can purchase insurance regardless of a pre-existing condition and workers will no longer be job locked because of health insurance benefits leading to the potential for more small business start ups (covered in an earlier blog).

Wendell does not deal with the individual mandate and how that will “encourage” the purchase of insurance (weak disincentive in the form of relatively minimal fines if one does not participate).  Not surprisingly, we are now seeing calls to delay the individual mandate timing to balance the delay in the employer mandate.  The NY Times had this to say about those Republican efforts.

I agree with Wendall that many of the few who work for large firms that will take advantage of this delay will welcome having an alternative Marketplace where they can go to purchase insurance and, depending on income, receive tax credits (basically have Uncle Sam share the premium bill with them).

One issue that I’ve not yet seen discussed has to do with how this is likely to increase the costs borne by the federal budget.  All along ACA has been predicated on the success of three different legs of the stool that make up how Americans are to be insured: employer-based insurance, public insurance, and now the Marketplace.

Employer-based insurance is a major leg of that stool.  Part of ACA’s success in reining in costs was the expectation that larger employers would help foot the bill by offering insurance as a work benefit.  Prices of products and services those businesses sell have always been impacted by how much their insurance costs are.  That will continue, unless and until health care prices are better controlled.

However, if some of this leg is less strong because some of the businesses over 50 don’t have to participate for another year, that means that workers may be looking to another leg of the stool, the Marketplace.  How much that Marketplace may cost the federal government may now be a heightened concern.

The initial ACA cost estimates for the federal portion of Marketplace costs were based on a certain number of individuals using the Marketplace and being eligible for tax credits.   The delay in the employee mandate is likely to increase the numbers looking to the Marketplace (after all, most Americans would have been buying insurance if it had been affordable and they had not been denied coverage).  And many of those new ones in the Marketplace will be eligible for tax credits where they would not have been had they be in employer sponsored plans.  So the costs of the delay of implementation of the employer mandate may result in a larger burden for cost sharing on the part of the federal government.

An interesting benefit of all of this is that we will be able to see more clearly just how much is really being spent on health care, at least as much as we translate the cost of premiums to be a reflection of the cost of care.  Right now many of the costs for the uninsured, the uncompensated care, get built into the cost of premiums for those of us who do purchase insurance.  And the costs borne by businesses are buried in the costs they charge for their products and services.  Perhaps more transparency of what it really is costing us for health care, and what we are really getting for those dollars (not very good population health outcomes) will help us ask the more difficult questions about the quality of what we are buying.  All thoughts for another day.


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