Policy Feature Issue: Employer Mandate in Obamacare

Policy Feature Issue: Employer Mandate in Obamacare

The President’s recovery is failing.  Millions of working Americans continue to struggle with the burden of financial constraints and unemployment.  Despite the President’s promise of lower healthcare costs, the real costs of Obamacare threaten the economic livelihood of millions of Americans.  The effect that Obamacare will have on employment and income is significant, and will contribute to further financial hardship.  Obamacare’s employer mandate will not only discourage businesses from hiring, but will result in lost wages and decreased working hours for their employees.  If left unaddressed, the employer mandate will cost businesses $140 billion in penalties and could eliminate as many as 1.6 million jobs in 2014.[1]  On July 2, 2013, the Treasury Department, in a blog post, revealed that the reporting requirements would be delayed! for an additional year.  As a result, the employer mandate for shared responsibility for healthcare coverage required in Obamacare cannot be enforced.

Facts You Need to Know:

  • Obamacare’s employer mandate requires that all businesses with more than 50 employees provide employer-sponsored insurance by 2014.  Businesses not in compliance will face a $2,000 penalty for each employee beyond the 30th they hire in addition to the salary and benefits they must provide to their employees.[2]  As a result, the employer mandate serves as a disincentive for businesses to hire 50 or more employees, limiting economic growth and job creation.  Employers could also pay a $3,000 penalty for each non-enrolled employee who is required to provide more than 9.5% of their W-2 wages to a company sponsored plan.  Employers must also pay an initial fee of $65 per person with insurance.[3]
  • The Congressional Budget Office (CBO) estimates that the employer mandate will cost businesses $140 billion in tax penalties from 2014 until 2023.[4]  This does not include the compliance costs businesses will be forced to pay.
  • The CBO estimates that Obamacare will reduce the amount of labor used in the economy by one-half of 1 percent due to the increased regulatory burden placed on businesses.  This accounts for approximately 800,000 jobs.[5]
  • The employer mandate will result in a significant number of employers dropping employer-sponsored health insurance (ESI) in favor of having their employees purchase health insurance on exchanges.  A 2011 McKinsey & Company report found that 30 percent of companies will discontinue offering ESI, and up to 60 percent of companies will pursue an alternative to ESI.[6]  Obamacare will ultimately result in greater economic losses for individuals as a result of the employer mandate.

Why is Delaying the Employer Mandate Important?

  • The employer mandate is yet another example of how Obamacare will cause a greater economic burden on working Americans.  Obamacare’s implementation will result in decreased hiring, less working hours for low wage earners, and fewer overall benefits.
  • As a result, the employer mandate is a significant impediment to economic growth.  Obamacare’s taxes will cost jobs and prevent organic growth of the tax base.  The employer mandate will impose significant institutional disincentives to hiring by businesses throughout the country.