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Research Questions

  1. What are effects on coverage rates and government revenue of the Obama administration's one-year delay in enforcement of the employer mandate, the Affordable Care Act's penalty on large employers that do not offer affordable health insurance coverage?

Abstract

In July 2013, the Obama administration announced a one-year delay in enforcement of the Affordable Care Act's (ACA) penalty on large employers that do not offer affordable health insurance coverage. To help policymakers understand the implications of this decision, RAND analysts employed the COMPARE microsimulation model to gauge the impact of the one-year delay of the so-called employer mandate. They found that the delay will not have a large impact on insurance coverage: Because relatively few firms and employees are affected, only 300,000 fewer people, or 0.2% of the population, will have access to insurance from their employer, and nearly all of these will get insurance from another source. However, a one-year delay in implementation of the mandate will result in $11 billion dollars less in federal inflows from employer penalties for that year. A full repeal of the employer mandate would cause revenue to fall by $149 billion over the next ten years (10% of the ACA's spending offsets), providing substantially less money to pay for other components of the law. The bottom line: The one-year delay in the employer mandate will have relatively few consequences, primarily resulting in a relatively small one-year drop in revenue; however, a complete elimination of the mandate would have a large cumulative net cost, potentially removing a nontrivial revenue source that in turn funds the coverage provisions in the ACA.

Key Findings

A One-Year Delay in the Implementation of the Affordable Care Act's (ACA) Employer Mandate Will Not Have a Substantial Effect on Insurance Coverage

  • Only 300,000 fewer people, or 0.2% of percent of the population, will have access to affordable insurance in 2014 because of the delay.
  • About 1,000 fewer firms, or 0.02%, will offer coverage in 2014 given the delay.

The Employer Mandate Will Affect Relatively Few Firms and Employees

  • We estimate that only about 0.4% of firms, employing approximately 1.6% of workers, will pay a penalty for not offering health insurance at all.
  • Based on current employer health plan contribution rates, we estimate that 1.1% of firms will pay some penalty for offering unaffordable coverage to a total of less than 1% of the workforce.

The Delay in Implementation of the Employer Mandate Will Lead to Less Revenue to Offset the Costs of the ACA

  • We estimate that the one-year delay in enforcement amounts to $11 billion dollars less in revenue for the federal government — $7 billion less in penalties that would be assessed on firms that do not offer insurance and $4 billion less from fines of employers that offer unaffordable care.
  • A full repeal of the employer mandate, not merely a one-year delay, would result in the loss of approximately $149 billion in federal revenue over the next ten years.

Research conducted by

The research was conducted in RAND Health, a division of the RAND Corporation.

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