Both the House and Senate versions of health care reform legislation contain mandates. The mandates refer to employees and employers alike. Some states have passed employer mandates requiring some level of health insurance protection for employees be provided by employers. Business owners need to understand what employer mandates entail and how the mandates will be applied.
Employer mandates in the health care insurance debate refer to any number of proposals requiring, as a matter of law, that employers provide health care insurance to their employees. If the employer does not, the employer faces fines, penalties, or increased taxes as a way of forcing the employer to comply with the law.
Health care reform as currently proposed would take place at a national level and enforce such a mandate nationwide.
Do Any States Currently Have Employer Mandates?
Yes. Massachusetts has a health care system in place that has an employer mandate. Employers with more than ten employees must make a "fair and reasonable" contribution to their employees' insurance or allow employees to contribute to a state risk pool. If the employer does not, the employer is charged a fee called a "fair share contribution" or a "free rider surcharge." This law was passed in 2007.
Hawaii passed legislation in 1974 requiring employers to offer health insurance to any employee working over 20 hours per week or the employer faces fines and sanctions.
Other states: California, Oregon, and Washington; have passed health care reform legislation in the past that contained mandates. These state programs have been overturned or were not implemented. Some states (like, Maryland) have passed "big employer" mandates focusing on large retail or agricultural employers who do not provide benefits. Some states will be considering new legislation with or without federal reform (again, like Maryland).
How Would it Work?
The plans differ, but a few key elements exist in every employer mandate:
- Size of Employer - Each employer mandate will apply to a specific size of employer and up. The way that size is determined is either by payroll or number of employees. In the U.S., small businesses drive the economy. Reformists recognize that smaller businesses cannot afford the mandate and it is important to define "small" business.
- Employees Covered - Reform proposals mandating employers provide coverage must identify which employees are covered. Are part-time employees covered? What is the definition of "part-time"? Are seasonal or trainee employees covered?
- Dependents Covered - Employer mandates must specify if dependents of employees must be offered coverage.
- How Much Coverage - The mandate must dictate how much coverage the employer must provide and whether that is determined by the amount of benefits or the cost of premiums.
- Enforcement Mechanism - Both federal plans working through congress on the Senate side and the House side have "play-or-pay" enforcement. That is, the employer is fined or taxed more in the event the proper amount of coverage is not provided. Other enforcement mechanisms may exist. For example, refusing all government contracts and/or licenses to employers that do not comply.
The Census Bureau found that roughly 59-60% of all people in the U.S. received benefits through employers in 2006. That is, roughly half of U.S. employers voluntarily offer some form of health care to their employees. Proponents of the employer mandate maintain that a mandate rewards those employers who provide coverage and brings to the table employers who do not. More often than not, employees of companies where no benefits were extended fell on publicly-funded health care to the detriment of the community and those employers providing coverage. Opponents contend a mandate is not free market economics and will damage small business.