The Right Prescription

The CBO’S Faulty Numbers

Delayed implementation of Obamacare will place an even greater burden on taxpayers than reported.

By 8.5.13

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On July 30, the Congressional Budget Office released its calculation of the impact of the Obama administration’s decision to delay Obamacare’s employer mandate for one year. Intentionally or not, the CBO’s $12 billion estimate is flawed, understating by a wide margin the cost to taxpayers.

On July 3, the Obama administration said that it will not enforce the mandate until 2015, though the law states it “shall” be in effect as of January 1, 2014. The CBO calculates $10 billion in lost revenue from penalties that noncompliant employers would have paid had the mandate been enforced in 2014. The CBO also estimates that only 1 million workers will lose on-the-job coverage “because few employers are likely to drop health insurance from their employees’ compensation packages for just one year.” The CBO assumes half these 1 million workers will enroll in taxpayer-subsidized plans on the exchanges, adding $3 billion to the costs of the health exchanges in 2014. The Obama administration’s decision to delay the mandate shifts these costs from employers to taxpayers.

That’s the CBO calculation. But it omits two additional, very sizable costs. One is the cost of covering the dependents of these workers who lose on-the-job coverage. On February 1, 2013, the Internal Revenue Service ruled that so long as workers are offered “affordable” on-the-job coverage for themselves, their dependents will not be eligible for subsidized coverage on the health exchanges. That ruling sparked outrage from many health advocates, because it threatened to leave millions of many spouses and children uncovered. But delaying the employer mandate means that not only will workers be eligible for subsidies but so will their dependents, adding billions more in costs that the CBO failed to include.

But there’s more. The CBO concluded reasonably that only a few large employers who currently offer coverage are likely to change course because of a one year delay in the mandate. Yet according to the Employee Benefits Research Institute (Bulletin 376), there are 6.9 million full time workers whose employers currently do not provide coverage and would have been required for the first time to provide it in 2014 under the employer mandate. Add to that figure another 3.1 million workers whose employers currently provide plans with annual and lifetime caps that will not be permitted after January 1, 2014, when waivers allowing these plans expire.

All in all, these 10 million workers will face a choice on January 1, 2014 of paying the penalty for being uninsured or enrolling on the exchange, in some cases along with dependents. It's difficult to predict how many will choose to enroll, but the cost will be several times the CBO estimate.

The Obama administration’s decision not to implement the employer mandate on January 1, 2014 violates the law. Presidents do not have the constitutional authority to pick and choose what parts of the law will be implemented. This is not a victimless crime. It clobbers taxpayers, adding far more to the cost of Obamacare than the CBO admits.

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About the Author
Betsy McCaughey, former Lieutenant Governor of New York, is author of Government by Choice: Inventing the United States Constitution.