The Treasury Department announced yesterday that implementation of the ACA’s employer mandate has been delayed by one year. The mandate is a central feature of Obamacare, requiring companies that have 50 or more full-time employees to provide health insurance for their employees or face a per-worker fee. The penalty or fee part of the law has now been pushed back, so that employers won’t be penalized at all for non-compliance until 2015. Employers are jubilant, as are Republicans. Politico:
“This announcement means even the Obama administration knows the ‘train wreck’ will only get worse,” Boehner said. “I hope the administration recognizes the need to release American families from the mandates of this law as well. This is a clear acknowledgment that the law is unworkable, and it underscores the need to repeal the law and replace it with effective, patient-centered reforms.”Boehner is quite right that this is not what the rollout of a well thought through, popular reform of the health care system looks like. The administration is essentially conceding that the critics were right: the law is poorly designed, hard to administer, and bristling with unforeseen consequences.
The announcement by the Treasury Department claimed that the main reason for the delay was the need to adjust employer reporting systems. If true, that would mean that the administration failed to solve a basic technical issue—one that Republicans had no control overand thus couldn’t be blamed for obstructing. But if you believe the Treasury Department’s explanation, we have a bridge to sell you.
This move was clearly political, not technical. The administration believes that having the law fully in place before the midterm would be a political disaster. It prefers to fight the next election with the law still impending rather than fully operational. This is very telling: Obama would rather deal with the fear, the rumors, the nasty innuendoes about how the law works than with the harsh reality of a functioning law.
The fact that this preference is rational is the scary part. The big worry about the employer mandate is that it will slow job growth. Employers faced with the choice between providing health insurance to all of their full-time workers or paying a hefty per-employee penalty are likely to respond by reducing the number of full-time workers they have. This predictable employer response is a very good reason to want to postpone the mandate until after the midterm. Nobody wants to run as an ally of the job-killing President whose policies led your voters’ employers to dump their health insurance.
Right now, Obamacare is failing. It loses popularity as time goes on, and the government has so far been unable to make it work. But the GOP should not be too quick to think this means the law will fail in the long term. Though this delay is clearly a PR disaster for the Obama administration, it may turn out to be a smart move that could save the law in the long-term. Obama now has an extra year to make the mandate work. Given time and good lawyers who can get creative with the sloppy language and contradictory provisions of this ugly mess of legislation, the administration may in effect be able to amend Obamacare substantively without going back to Congress.
Even so, this is going to embolden critics of the law and give them plenty of ammunition to keep up a withering barrage of fire. There is really no other way to see this than as a major political and policy setback for the White House on its signature issue. At Wonkblog, Sarah Kliff quotes John McDonough, who was a health care adviser for Ted Kennedy:
“Politically, it won’t get easier a year from now, it will get harder,” he said. “You’ve given the employer community a sense of confidence that maybe they can kill this. If I were an employer, I would smell blood in the water.”ACA supporters should be very nervous right now, because the next Congress will have another bite at this apple. If the GOP does well in 2014, holding the House and picking up some Senate seats (with an outside chance of a majority), they could cast the long-term future of Obamacare into serious question.
There’s two things to note in closing. First, it’s striking that President Obama didn’t get legislative approval for this delay, instead instructing the IRS to simply not collect the penalties. The law on the books will still officially say the mandate is in effect in 2014, but it won’t be enforced. The White House is clearly sick and tired of a Congress that never quite gives it what it wants, and so it is looking for areas where it can act on its own. For a candidate who attacked Bush’s imperial presidency, Obama is certainly showing a large appetite for power and a penchant for using presidential “discretion.”
Second, this delay—especially if it is extended or made permanent, as many hope—will put more pressure on the individual insurance exchanges. More employers could now choose to dump their employees onto the exchanges rather than pay for the premium increases many expect under the ACA. More people on exchanges instead of on employer-based insurance might be a desirable result in the long term, but in the short term it will cost the taxpayers more than previously projected. A major rationale for the employer mandate was to keep the number of people on the exchanges to a minimum, lowering the total cost of the law. If the mandate is repealed and the costs balloon, Obama may do no more than trade employer opposition to the ACA for taxpayer opposition.
Either way, there is no easy path out of this mess for the administration. Once again, Obama seems to have backed himself into a corner. The delay may give him enough time to ultimately pull this thing off, but we’re not holding our breath for this outcome.
