Cost and Coverage: The Impact of Implementing Various State Health Care Reform Proposals Nationally. Employer Mandates


An employer mandate to provide health insurance coverage for employees can be implemented strictly as a mandate requiring compliance without any alternative options, or it can be implemented as a mandate to either provide coverage or pay a “penalty” in the form of a tax or assessment.  If significant enough, the penalty could be used to subsidize coverage of the firms’ uninsured workers through an alternative insurance program.  This type of arrangement is often referred to as a “pay-or-play” mandate.  While there are only a handful of employer mandates in force around the country, only one is strictly a mandate to provide coverage; the others are of the “pay-or-play” variety.  In addition, states and local jurisdictions, as well as presidential candidates, are considering the benefits of imposing pay-or-play mandates on employers.

Employer mandates are meant to build upon the strong base of employer-sponsored insurance in the United States, expanding coverage to working individuals and families and reducing the number of uninsured.  Proponents of employer mandates argue that the majority of covered individuals in the U.S. get their health insurance through their employer, making this approach to expansion the most practical and efficient.  But opponents fear that employer mandates will have a negative impact on employment for low-wage workers.  The increased expenditures associated with requiring employers to offer a new benefit could result in reduced wages, which would have a significant impact for low-wage earners.  Some could see wages reduced further, restricting already tight budgets, while others may actually become unemployed as firms lay off minimum wage workers because they cannot reduce their wages any further and they cannot afford to retain the positions with an added insurance benefit (NBER, 2007).

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