July 3, 2013 10:46AM

What’s Really Behind Postponement of the Employer Mandate?

The Obama administration has just announced it is suspending until 2015 the ACA’s mandate that all businesses with 50 or more employees provide health insurance to their workers or pay a $2,000 per employee fine.

The announcement raises two issues.

First, why does the ACA have an employer mandate in the first place? The “logic” of ACA’s three key provisions – mandating that everyone has insurance, banning insurers from denying coverage based on pre‐​existing conditions, and imposing the same premium for everyone – is that under these provisions, everyone gets insurance at an actuarially “fair” price, and individual risks are shared as widely as possible.

Nothing in this logic requires an employer mandate; the individual mandate is sufficient. So did Democrats have some non‐​obvious reason for including an employer mandate? Or were they just confused?

Second, why is the administration suspending the employer mandate now? Could it be the administration is worried that too few healthy individuals are going to purchase insurance via the individual‐​market exchanges, which means the pool insures will be less healthy than average, which will then increase premiums, which will then discourage even more people from participating?