Topics: Obamacare

Obama should work with Congress to eliminate employer mandate

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Opinion,Diana Furchtgott Roth,Columnists,Obamacare,Employer Mandate

President Obama has done it again. Without consulting Congress, he has once more postponed the requirement that employers with 50 to 99 workers offer generous health insurance or pay a fine--this time until 2016.

Firms with 100 or more employees will have to offer insurance to only 70 percent of full-time workers in 2015 and 95 percent in 2016 and thereafter.

Mr. President, this is a major improvement in the law. Why not ask Congress to make it permanent? No fines for hiring workers. Then, employers might start hiring again.

Although the White House has long denied any connection between Obamacare and hiring, with the economy adding a paltry 113,000 payroll jobs in January, and 75,000 in December, Obama is under pressure to do something about jobs.

Last summer, White House spokesman Jay Carney said, “The data reflects that there is not support for the proposition that businesses are not hiring full-time employees because of the Affordable Care Act."

The decline in the unemployment rate to 6.6 percent, which would be good news if unemployed workers were finding jobs, is caused primarily by discouraged workers leaving the labor force.

New data from the Labor Department, released on Tuesday, showed that job opening and hiring rates declined in December from their November levels.

The Congressional Budget Office predicted last week that 2.3 million fewer people would be working in 2014 due to Obamacare--because they would choose to stay home or work fewer hours.

Hence Obama’s decision to modify the law, unilaterally, by regulation.

This is a big change from the Affordable Care Act, which originally called for all businesses with 50 or more workers to offer health insurance—or pay a fine—on January 1. Hiring a 50th worker could cost a firm $40,000 a year in penalties because the first 30 are exempt.

In July 2013, without congressional action, the president postponed the deadline for compliance until January 1, 2015.

The president has promised more executive orders, but this is stretching the law too far. The penalties and deadlines are written into the text of the Affordable Care Act. The provisions are misguided, but they are still law.

The Treasury fact sheet states that the requirement to offer health insurance only affects 4 percent of employers, because 96 percent have fewer than 50 workers.

But this relies on a static view of job growth. Businesses start small--think of Apple, Facebook, and Google--and some grow. Some franchisers start with one business and add more. Many firms will be constrained by the Obamacare penalty. They might contract out new work, or hire higher-paid employees and take the penalty out of their cash wages.

In 2015, for firms with 99 employees, I calculate that hiring a 100th employee could cost the firm $80,000 if it does not offer health insurance.

An extra payment of $80,000 is a significant disincentive to expansion for many businesses.

Why not get rid of the penalty altogether, and take $140 billion in expected employer penalties over 10 years out of general revenues? That permanent change would encourage hiring.

Back in the old days, before Obamacare, firms could employ as many workers as they wanted without fear that they would be charged a $2,000 per worker health insurance penalty.

Then, unemployment rates were between 4 percent and 6 percent. An unemployment rate of 6.6 percent was unacceptable and a rate of 10 percent was as unimaginable as a $2,000 penalty for hiring.

Rather than using dubious authority to delay employer mandates, Obama should work with Congress to eliminate them permanently.

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a Washington Examiner columnist. She directs www.Economics21.org at the Manhattan Institute. Follow her on Twitter here.
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Diana Furchtgott-Roth

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The Washington Examiner