Stunned by the $1.6 trillion price tag for their health care plan, the Senate Finance Committee is weighing a ‘pay or play’ employer health mandate. Staffers are still negotiating which businesses will fall under the mandate, and how they are to be punished if they fail to offer “affordable” health care to their employers, but the ultimate details matter little: employer mandates are terrible public policy.
1. Employer Mandates Are A Regressive Tax. An employer mandate would be a regressive tax on business that would be directly shifted to employees in the form of reduced future wages or job losses. But don’t trust us. Obama White House National Economic Council Director Larry Summers wrote in 1989: “Mandated benefits are like public programs financed by benefit taxes… There is no sense in which benefits become ‘free’ just because the government mandates that employers offer them to workers.”
2. Employer Mandates Increase Unemployment. An employer mandate is simply a disguised tax on employment. Like anything else you tax, when employers are taxed for employing people, they respond by employing less people. Estimates suggest that an employer mandate could cost 1.6 million jobs over the first five years. Summers, again: “[Minimum] wages cannot fall to offset employers’ cost of providing a mandated benefit, so it is likely to create unemployment. This is a common objection to proposals for mandated health insurance, given that a large fraction of employees who are without health insurance are paid low wages.”
3. Employer Mandates Are A Special Interest Bailout. There is one industry that does love employer mandates: the health insurance industry. President Barack Obama explained why last year: “The insurance companies actually are happy to have a mandate. The insurance companies don’t mind making sure that everybody has to purchase their product. That’s not something they’re objecting to.”