Obamacare: Why not just scrap the employer mandate?

More on this news from the other day about postponing the fines for mid-size employers who don’t provide coverage as of January 1, 2014.

Ezra Klein, Russ Douthat and a few other big name commenters have been saying that Congress should get rid of the employer mandate. Zeke Emmanuel mentioned on MSNBC’s Morning Joe that there had been a proposal in the Senate to replace the mandate with a percentage-of-payroll minimum tax on employers who did not offer health care coverage. The vagaries of maintaining a 60-vote supermajority during early 2010 sunk that proposal, after Senator Ted Kennedy died.

As I was saying the other day, the Health Insurance Exchanges in the various states (many of which will be an exchange run by the federal government through healthcare.gov ), are going to be found to be better coverage than what many midsize employers already offer. This is because businesses are only required to provide Bronze level (60-40) coverage, and the Exchanges are geared toward offering Silver level (70-30) and include cost sharing credits for people whose income is below 250% FPL.

I could see business decide to “dump” employees onto the Exchange, and the employee actually being better off if he/she currently has to contribute to the employer’s health care plan. The concern is only that the money the employer would not get to deduct for health insurance expense (i.e. a tax break they lose) would not be sufficient to cover the premium credits that Exchange users are eligible for under Section 36B.

(You see, there is a subsidy either way. You are subsidized when the employer provides the insurance. It is tax-free to you, and the employer can deduct it as a compensation cost. If you buy on the Exchange, you use after-tax dollars (not tax-free ones) BUT you get a tax credit if you are at less 400% FPL on MAGI. Obamacare creates a new subsidy, but it’s one that is hardly strange or unusual, since employer-provided health insurance has been this other subsidy going on for 70 years now.)

The Republicans can yelp all they want, but the Section 36B credit is not going away. Once a lot of people find out that the Exchanges work for them, and work out really well, there’s going to be a constituency for the new law. I feel this is what they’ve [the Republicans’ have] been against from the get-go: a solution that creates a voting bloc against them.

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