Why Delaying the Employer Mandate is Good Policy and Great Politics

Yesterday's White House announcement that the administration would be delaying the enforcement of the employer responsibility provision for a year sent Republicans thumping their chests, and it made the usual suspects on the "Left's" self-proclaimed representatives on the media quite disappointed. Knew it, they said, of course Obama would sell out to big business.

For those who refuse to learn, the lesson will always be lost. But Barack Obama doesn't do things without thinking a hundred steps ahead. The move to delay the employer mandate was made for two reasons: policy and politics. On the policy count, it was the right call - both because of the administration's effort to cut red tape (the reason they cited), their success at arresting health care costs, and because it serves the policy goal from a progressive standpoint to sever health insurance from employment. On politics, it was brilliant - not simply because it deprived Republicans of examples to pull in the middle of a heated election season but more significantly because the move would give Democrats breathing room to concentrate on the rewards of the law rather than the penalties.

Warning: If you believe that all business is inherently evil and needs to be slapped with big penalties asap and beat up, then the following explanation won't work for you. But if what you are looking for is a health care system to really work and for progressive ideas to advance, follow me.

Let's discuss policy first.

The employer responsibility provision is meant to make medium and large businesses either provide quality coverage to their employees (who work at least 30 hours a week). The administration's effort to cut red tape is sincere. They have already cut down the individual application for health insurance through the exchanges from 21 pages to 3 pages. Now, they want to simplify the rules so that business that already comply with the requirements and do the right thing do not have to go through a process about collecting and submitting information on each employee's health coverage status. That sounds fair to me. Writes Valerie Jarrett:
First, we are cutting red tape and simplifying the reporting process. We have heard the concern that the reporting called for under the law about each worker’s access to and enrollment in health insurance requires new data collection systems and coordination. So we plan to re-vamp and simplify the reporting process. Some of this detailed reporting may be unnecessary for businesses that more than meet the minimum standards in the law. We will convene employers, insurers, and experts to propose a smarter system and, in the interim, suspend reporting for 2014.
Because a new system of reporting is being developed, the implementation of the reporting from January 1, 2014 may be too soon. The US Department of Treasury explains this further:
Here is some additional detail. The ACA includes information reporting (under section 6055) by insurers, self-insuring employers, and other parties that provide health coverage. It also requires information reporting (under section 6056) by certain employers with respect to the health coverage offered to their full-time employees. We expect to publish proposed rules implementing these provisions this summer, after a dialogue with stakeholders - including those responsible employers that already provide their full-time work force with coverage far exceeding the minimum employer shared responsibility requirements - in an effort to minimize the reporting, consistent with effective implementation of the law.
Once the rules are proposed, then finalized - and here is the crucial part of the actual policy everyone seems to be missing - their implementation begins immediately. It does not wait till 2015. Employers are basically being given a grace period in which to figure out how to comply and get into gear.
Once these rules have been issued, the Administration will work with employers, insurers, and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015. Real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.
But, you say, why would businesses implement the rules voluntarily before they absolutely have to on January 1, 2015? Because businesses, you see, aren't run in a vacuum. They have their own financial cycles, budgets, etc. If a business' fiscal year starts on July 1, 2014, and they know they have to comply with this in six month's time, they will implement it at the beginning of their fiscal year rather than in the middle of it.

Secondly, businesses have in fact implemented Affordable Care Act provisions before deadlines approached. Many insurance companies began covering children with pre-existing conditions before the deadline for it approached, and many more incorporated the mandate on letting parents keep their children, up to 26, on their health insurance plans. The tax on Cadillac plans, for example, don't go into effect until 2018, and employers have already begun to take steps to stave off its effects by adjusting their plans, pushing hospitals for better rates, and raising employee cost-sharing on overly generous plans.

Third, while the stick has arguably been delayed, the carrot has not. Companies can do the right thing and collect a great deal of tax credits next year under Obamacare, such as expanded ability to spend on wellness and claim it on their taxes. Why wouldn't they try to do that?

So expel from your mind the assumption that moving the date on which the fines start being collected necessarily means moving to that date any effect of the actual rule and law. The goal of the fines is not to collect the fines, per se; the goal is to get employers to offer quality coverage to their employees.

What about the impact on the treasury? After all, these fines were at the least going to put some money into the Affordable Care Act - and now Obama has deprived the ACA from it for a year! Right? Let's clear that up. Before we proceed further on policy, it is important to recall why it is even possible for the Obama administration to make this delay. Since the passage of the Affordable Care Act, health care spending growth has slowed down - defying historical trend even while accounting for the economy. In fact, according to a report by PricewaterhouseCoopers Health Research Institute, health care spending growth will dip in 2014 even though the economy will grow faster, due partly directly to the Affordable Care Act (so much for the loud moaning that it doesn't do anything to control costs).

The PwC study specifically cites the ACA's hospital readmission penalties and incentives for employers to positively influence the health behaviors of their employees (such as wellness programs and rewarding good behavior with reduced premiums). But the indirect effects of consumers becoming more involved in health care decisions as well as providers taking advantage of Obamacare's incentives to reduce costs are also factors affecting this change.

The successes of the ACA are also resulting in lower-than expected premiums in the exchanges to be opened in 2014 - which means the government having to pay a smaller subsidy. All of this combined would more than offset whatever revenue we may lose from the fines not being collected for a year.

Next question - even if the cost was a wash, wouldn't it mean more people being on the exchanges in 2014 than would be otherwise had the penalties forced employers to provide coverage? Probably, although we don't know exactly where that additional number will fall. But to the extent that it will happen, progressives really should be celebrating. Progressives have always championed decoupling health care from employment (this is the biggest reason why as an end goal, we support single payer), and to the extent some employers will "dump" their employees into the exchanges, it will accelerate that trend. Might some employers decide that since their employees are being covered in the exchanges anyway, that they will just make the employer responsibility payment and rather not deal with insurance companies in 2015? I hope so!

And this of course brings us to why this is a brilliant stroke of politics by the White House.

Most seem to think that politically, this is a move to appease business in the wake of the 2014 elections. I think it's deeper than that. Let's explore.

After the Tea Party wave disaster in 2010 - which big business funded - they were rewarded with a debt ceiling crisis that almost crashed the global economy again and crazy wingbats who concentrated on all sorts of things like abortion and anti-immigrant nativism that hurt business. In 2012, they thought Romney would be savior, but that didn't work out so well, either - partly because of the Teabagging monster big business helped create in 2010. They would like not to repeat that, and now the Obama White House has given them a reason to hold back the cash from the crazies. Will money still flow? Definitely. But all Democrats need to do is trim off some fat here and there and we've got a shot at putting an end to John Boehner's miserable speakership.

In the mean time, the decision deprives Republicans of an end-times style campaign against health reform by showcasing medium sized businesses that get hit with the fines and daunting reporting requirements. The real beauty is that it will screw up Republicans plans to 'rally the troops (dampen their base's morale). Democrats can correctly say that the president has delayed the fines and simplified the reporting requirements. Democrats an correctly demonstrate that we want to cut red tape. Democrats can still showcase families that gained coverage and tout the virtues of the law. Democrats can run on ObamaCare and what it does for everyday Americans without being pigeonholed about red tape.

Conclusion

I said this at the outset of this article, and I will say it now: Barack Obama does not do anything without thinking 100 steps ahead. For all the derogatory references to "eleven dimentional chess" to ridicule the president's political acumen, he has proven this over and over again. He's the man who rose from a State Senator to President-elect in 4 years, became the first African American to be elected president - twice, passed transformative reforms, played the Republicans so badly that Boehner claimed he'd stop even negotiating with the president because he always loses, and pulled the rug out from under the Republicans on all of their trumped up "scandals" (such as "IRS-gate" and BENGHAZI!!!).

The president and his team know what they are doing - both from a policy standpoint and a political one. And they are masters at how to make the two converge and make good policy into good politics. What we need to do as progressives is make sure that this plan works. We need to work doubly hard to elect Democrats to Congress and give this president a Congress he can work with in the final two years of his term.