The Right Prescription

Stop the Jarrett Tax!

Delaying employer mandate could cost taxpayers $62 billion first year.

By 7.17.13

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Earlier this week, the Urban Institute released a simulated model of what the Affordable Care Act would cost minus the employer mandate. The Institute claimed delaying the mandate would have little impact on the cost to taxpayers. Nonsense. Taxpayers will get clobbered with a tab that could go as high as $62 billion in the first year.

The Institute's flawed simulation ignored the estimated 10 million workers who are currently uninsured or underinsured and who work for large employers. These employers would have been affected by the mandate beginning January 1, 2014. Many of their employees will now seek subsidized coverage for themselves and their dependents on the health exchanges. You and I will foot the bill.

According to the Employee Benefit Research Institute, there are 6.9 million uninsured full-time workers whose employers would have had to start providing coverage. (See EBRI Bulletin 376, figure 12.) These 6.9 million workers will have to enroll in exchange plans or pay a penalty to the IRS. The same goes for 3.1 million workers currently covered by mini-med plans (that have annual or lifetime caps on benefits). These plans are allowed under waivers that expire January 1, 2014.

All in all, the administration's edict delaying the employer mandate puts ten million workers between a rock and a hard place: Sign up for an exchange plan or pay the penalty. The average single worker may opt for the $95 first year penalty. But many uninsured workers with dependents are likely to enroll on the exchange. Last February, the IRS ruled that the dependents of any worker offered affordable on the job coverage would be ineligible for an exchange subsidy. That left millions of spouses and dependents without access to subsidized coverage. The administration's recent decision to delay the mandate will actually be good news for these dependents. With the employer mandate delayed, they will be eligible.

If half of the employees currently uninsured or underinsured go to the exchange and seek coverage for themselves and their dependents, the cost will be a staggering $52 billion the first year, plus as much as $10 billion in lost employer penalties (Congressional Budget Office estimate, May 2013). If only a quarter of these employees enroll in exchange plans for themselves and dependents, the cost will still be an enormous $26 billion plus billions more in foregone employer penalties. That's for one year only!

Never mind the cost to you. The administration is desperate to shore up the faltering health exchanges and avert an under-enrollment crisis. Health and Human Services Secretary Kathleen Sebelius begged the NBA and the NFL to convince their fans to sign up for exchange plans. Success depends on enrolling young, healthy adults and families whose minimal health needs will offset the cost of the sick and middle aged, preventing premiums from spiking more than they already have. But the NBA and NFL refused Sebelius’s request.

That's when the administration suddenly postponed the employer mandate. White House spokesperson Valerie Jarrett depicted it as a minor administrative adjustment to accommodate business. Don't be bamboozled. It was a last ditch move to drive more people to the exchanges. Jarrett never said a word about what this change would cost. Nor did any Obamacare supporters. At least not until the Urban Institute claimed the cost would be minimal. The Urban Institute assumed that employers currently providing coverage won't stop. Maybe that's true. But its report omitted the ten million currently uninsured or underinsured workers on jobs with large employers who would have been affected by the mandate beginning January 1, 2014. 

As members of Congress open debate today on delaying or repealing the employer mandate, they need to see the enormous costs that will be shifted to taxpayers. The figures are undisputed. It's time finally to consider the impact.

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About the Author
Betsy McCaughey is a former Lt. Governor of New York and author of Beating Obamacare.