The Right Prescription

The Employer Mandate and the Alternative

Government should be incentivizing freedom, not its disappearance.

By 6.22.09

Send to Kindle

On June 15, before the American Medical Association meeting in Chicago, President Obama proclaimed: "While I believe every business has a responsibility to provide health insurance for its workers, small businesses that can't afford it should receive an exemption." He had made a similar statement in a June 2 letter to Senators Kennedy and Baucus, chairmen of two Senate committees drafting healthcare legislation. He wrote that he was open to proposals that would "ask[] employers to share in the cost" while "small businesses…should be exempted." In neither instance did he use the term "employer mandate," but small business could not be "exempt" from anything other than an otherwise applicable mandate.

An "employer mandate" -- by which employers must pay for the health care (that is, health insurance) of their employees or pay a tax -- assumes that an employer has an obligation to care for the health of his or her employees. Upon what does such an expectation rest? To use a term President Obama would understand from his days teaching constitutional law, what is the "rational relationship" between being an employer and paying for the health care of an employee?

Let's cut to the chase. There is no rational relationship. Of course, an employer is obliged to provide a workplace that is safe, that is conducive to the employees' health. The "employer mandate" as being used in the current debate on healthcare legislation is not restricted, however, to providing a safe workplace but extends to the health generally of the employee. Furthermore, it is not restricted to employees, but also to their spouses and children.

The expectation, the relationship, rests on history. Employers started giving health insurance to their employees and dependents during World War II in an effort by employers to compete in the marketplace for employees when the government would not allow them to compete for employees based on wages (since there were wage and price controls). The federal government agreed not to count this as income to employees. After wage and price controls were lifted, employers continued -- to this day -- to compete for employees by offering health insurance. By now, the Kaiser Family Foundation reports, two-thirds of Americans under age 65 (158 million) have health care coverage through their employer.

Health insurance premiums have become ever larger. This is reflected in the taxes that would otherwise have been received by the U.S. Treasury from individuals -- $240 billion per year. (As Betsy McCaughey points out, however, the American people devote about the same share of their income for food, energy, housing and healthcare now as they did in 1960.)

For the past decade, as health insurance premiums have increased, there has been a downward trend in the scope of employer coverage. Instead of more and more employers offering better and better coverage, employers are decreasing their contributory share to the health insurance of their employees (thereby raising the share of the employees' contribution) and many have stopped offering health insurance as a benefit of employment. Without insurance, the employee is often (not always) left with buying individual policies without the cost advantage of belonging to a group. (President Obama, like so many others, refers to the number of uninsured as 46 million, a figure that includes, as Betsy McCaughey noted, the 14 million who are eligible for public aid and the 24 million who have sufficient funds to purchase insurance but choose not to do so.)

Asserting that health care is essential to every person, asserting that health insurance is important to every person, does not logically lead us to the assertion that employers must be required by law to pay for the health insurance of their employees and their dependents. By this reasoning, we could just as well assert that, since food, clothing, shelter and education are also essential, government should mandate employers to provide these.

Indeed, there are some employers who provide employees and their dependents with food, clothing (a uniform), shelter (company-owned and gated) and education (private schooling for minors). And 24/7 security. And transportation once or twice yearly to visit relatives. And rotational cycles of 30 days on, 30 days off. And a car allowance. And life and disability and vision and dental insurance. And a defined pension. And stock options. And a high salary. No, these perks are not limited to top management. In yesteryear some of these perks were granted to residents of company towns, such as the Pullman neighborhood of Chicago, and Hershey, Pennsylvania. Today, employers routinely give these benefits to "expats" (expatriates), that is, employees who work in countries other than their home countries.

Under what circumstances will our government mandate employers to provide the same perks expats receive to all of their employees regardless of where they work? It would seem there are two criteria: if the benefit is deemed essential and if the benefit costs a lot of money.

I think the rapacious Democrats are like Willie Sutton. When asked why he robbed banks, he reputedly answered, "Because that's where the money is." The rapacious Democrats will require employers to provide health care to employees because employers are regarded as having the money.

Jobs run the gamut from those with low pay, hard work, and no benefits to "good jobs" consisting of high pay, light work, and a plenitude of benefits. People aspire to obtain "a good job." If the government should intervene in the market and mandate that every employer provide health insurance to every employee (and their dependents), then all jobs will have health insurance, thereby restricting the ability of employers to compete for employees and reducing the incentive of people to compete for jobs.

You may respond that an employer mandate for health insurance is similar to the mandate of a 40-hour work week or an 8-hour day or maternity leave. But health insurance is not like these other mandates. These other mandates are related directly to work and the workplace. An employer mandate for health insurance is more like the government mandating employers to provide affordable housing to every employee or mandating a defined pension or a minimum contribution to employees' 401(k) accounts.

Oh, the President will consider exempting small business. Tell me, how will the government define "a small business"? Will the criteria change over time so that what is deemed small today will be deemed big tomorrow? (This was Joe "the Plumber" Wurzelbacher's critique during the 2008 presidential campaign, on CBS News, Oct. 15.) Why would a small business want to grow into a big business if, after it meets an IRS threshold, it will be required to provide health insurance for all of its employees? And why would an individual start a business knowing that, if he or she is successful, he or she will be required to pay for health insurance for every employee -- not because the market requires it to attract employees but because the government requires it?

Once we distinguish in principle between businesses that would be subject to a mandate and those that would not be, it allows us to consider distinctions other than big/small. What about businesses that create health hazards and those that do not? Let's focus on the President's language in his June 2 letter concerning "unmanaged chronic diseases" or the reference in his June 15 speech to "[f]ive of the costliest illnesses and conditions -- cancer, cardiovascular disease, diabetes, lung disease, and strokes." President Obama cited Safeway in his June 15 speech. As Steven A. Burd, the CEO of Safeway, reported in the June 12 issue of the Wall Street Journal, that company, a self-insured employer, has reduced employee contributions to health insurance for particular employees, as allowed by HIPAA (1996 Health Insurance Portability and Accountability Act) if they employee can show improvement in the following areas: tobacco usage, weight, blood pressure and cholesterol levels. Thus, instead of distinguishing between big and small businesses, the government could mandate that companies that exacerbate these, and other, health problems, pay for the health insurance of all of us. Among these would be junk food makers, tobacco companies, TV and video entertainment (think couch potato, with an exemption for Wii), manufacturers and dealers of less-safe cars, and gun manufacturers and dealers.

PERMIT ME TO MAKE another couple of points about the Democrats' plans. First, the government will necessarily have to dictate the minimum elements of the health insurance mandated of employers: maximum deductibles, maximum co-pays, drug coverage, minimum lifetime limits, abortion coverage, same-sex spouse coverage, polygamous spouse coverage, in vitro fertilization for unwed employees, and on and on.

Second, the President's letter (and later his speech) included the following argument for establishing a government-run insurance program to which every American could subscribe (commonly called "the public option"): "I strongly believe that Americans should have the choice of a public health insurance option operating alongside private plans. This will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest." By the same reasoning, the government could establish a government-owned car manufacturer (indeed it has), a government-owned bank (indeed it has), a government-owned television station, a government-owned chain of pizza parlors -- all to make the market more competitive and keep the private sector competitors honest.

My response is this: Any healthcare legislation enacted by a legislature established by the United States Constitution should enhance our freedoms -- the freedoms of employers, of employees, of healthcare providers, of health insurance carriers. We must find a way for our government to encourage entities other than employers to offer health insurance and offer them the opportunity to do so across state boundaries. This would provide an exponential increase in competition, freedom of choice for all, and no worries by individuals about portability from job to job or about pre-existing conditions.

Imagine this if you would: You belong to an association devoted to the cure of juvenile diabetes. Under new legislation, the association offers health insurance to all of its members -- with the profits from its health insurance program going to fund research for the cure.

Americans belong to a host of associations and organizations: fraternal organizations like the Elks, Optimists, Shriners, Knights of Columbus; churches, synagogues and mosques; unions; ethnic groups such as NAACP, Ancient Order of Hibernians, La Raza; Daughters of the American Revolution; college alumni associations; National Rifle Association -- you name it. Each of these could be incentivized to provide one or more plans of health insurance to members. These entities could bargain on behalf of thousands of members for group rates, or even self-insure. You could select a plan to meet the needs of you and your family from one of the entities to which you belong. You would not be dependent on your employer for health insurance.

Just as the law has incentivized employers since World War II to provide health insurance for employees, the law could incentivize non-employers to do so. Although an employer could continue to provide health insurance, nearly every employer would see that it would be better to give a voucher to employees who could choose their own plan from various sources. At the same time, the employer could eliminate from its budget the administrative burden of negotiating with an insurance provider and administering the insurance plan.

We are constantly told that now -- this summer -- is the time to reform the health care system in America. If we are to enact changes, let us resolve to make changes consistent with American liberties. Having the government mandate that employers provide health insurance, having the government create distinctions between big and small businesses, having the government establish minimum health care coverage, and having the government incorporate a government-owned health insurance carrier does not qualify as change consistent with American liberties.

Like this Article

Print this Article

Print Article
About the Author
James M. Thunder is a Washington, D.C. attorney.