clock menu more-arrow no yes mobile

Filed under:

The GOP's latest Obamacare "fix" will be a total disaster if it passes

Joe Raedle/Getty Images

This week the US House of Representatives is scheduled to vote on one of the most-debated Obamacare provisions:  the employer mandate.

It requires all employers with over 50 employees either provide health insurance to their full-time workers or else pay a fine. The business community hates it, policy wonks are lukewarm on the idea, and the White House unilaterally delayed its implementation in 2013.  In other words, it's a perfect weak spot for Republicans to aim at.

There's only one problem — while the GOP bill would certainly help business owners evade the cost of their employees' health care, it would almost certainly be counterproductive in terms of its alleged goal of helping workers find full-time work.

The employer mandate

The employer mandate works by subjecting companies to two tests. One is do they have over 50 "full-time equivalent" employees, a counting method by which two part-timers could count as one FTE. If they do, they are subject to the mandate. A company subject to the mandate needs to provide a health insurance plan to all of its full-time employees — defined as someone who works at least 30 hours a week — or else pay a per employee fine.

The idea here is three-fold. The mandate should help raise some revenue via companies paying the fine. The mandate should also somewhat reduce the Obamacare's costs by inducing some employers to offer insurance plans thus sparing the federal government the need to offer subsidies for the purchase of Exchange plans. Last, the mandate helps reassure companies that have long offered insurance plans to their employees that less generous competitors won't secure an unfair advantage at Uncle Sam's expense.

The problem, however, is that the mandate creates a cliff from an employer's point of view. As soon as a worker becomes full-time, he becomes much more expensive. That creates strong incentives to cut workers' hours. Thus this issue has become a lynchpin of a conservative narrative about "part-time America" and a key example of how Obamacare is making the economy weaker.

A cure worse than the disease

What Republicans have hit upon, however, is a cure worse than the disease. Their proposal, as outlined by John Boehner and Mitch McConnell in a Wall Street Journal op-ed, is to "restore the traditional 40-hour definition of full-time employment, removing an arbitrary and destructive government barrier to more hours and better pay created by the Affordable Care Act of 2010."

Except it turns out that the authors of the ACA weren't idiots. As Yuval Levin explained in a recent National Review item, the 30 hour threshold was established "in part to limit the degree to which employers cut worker hours by putting the cut-off well below the number of hours that most workers put in." Sherry Glied and Claudia Solis-Rosman have shown that while working slightly more than 40 hours is common, working slightly more than 30 hours is rare. In other words, few workers are at risk of having hours slashed from 31 per week to 29, but many could be cut back from 41 to 39.

Both smart conservative analysts and simple purists see this as a reason for Republicans to go all or nothing. Either repeal the employer mandate or leave it as is, but don't monkey with it in this way.

Lifting the hours rule would help businessmen get richer

While a shift from a 30-hour definition to a 40-hour definition would exacerbate the problem of hour cuts, it would help solve one very serious problem — the problem of rich businessmen who would like to see higher profits rather than lower profits.

Lifting the hours threshold would automatically cause millions of workers to fall below the limit, saving their employers money in insurance premiums and fees to the government. And lifting the hours threshold would also make it easier for employers to monkey with workers' schedules to get them redefined as part-time.

At a time when corporate profits as a share of the economy are abnormally high, boosting profits at the expense of workers' health insurance coverage isn't necessarily a great political slogan. But it's still something that business owners and managers care passionately about, and business priorities tend to get a thorough airing on the Hill.

Sign up for the newsletter Sign up for Vox Recommends

Get curated picks of the best Vox journalism to read, watch, and listen to every week, from our editors.