Here’s How To Repeal The Employer Mandate And Cut The Deficit (And Then Some)

Some people say that bipartisanship is dead. But if rumblings in the House are to be believed, cooperation on Obamacare may yet be possible. The “Save American Workers Act of 2014,” which passed the House 248-179 (with 18 Democrats voting in favor) amends the ACA to redefine “full-time employees” as being those who work 40 hours, rather than the 30 hour definition in the law. While this would have a relatively marginal effect when all is said and done (criticism of the bill has focused on those who are expected to lose coverage as a result  – on net about 1 million people), it does begin to repeal an important budget gimmick in Obamacare – the employer mandate.

Those who follow this space should be familiar with the dual-mandate created under the health care law. First, all individuals are required to obtain insurance, else pay a tax; but on top of that, employers with 50 or more full-time equivalent workers are required to provide their full-time workers with health insurance, else pay a per worker penalty of $2,000 (for a much more in depth discussion of employer penalties under the law, see this 2013 CRS report).

Two questions should spring to mind immediately.

First, why is there an employer mandate in the law? The individual mandate (however morally questionable) has some economic justification – with community-rated health insurance, a mandate is needed to get healthy people into the risk pool. Otherwise, adverse selection prevails. (Those looking for a more academic take on this, should read this article.) But the employer mandate is more difficult to justify – indeed, it is little more than a budget gimmick that helps the ACA reach budget neutrality on paper. The revenue generated is substantial – $151 billion over 10 years according to the CBO’s latest baseline estimates.