Relax--Obamacare's Employer Mandate Affects Few Businesses

Niraj Chokshi

The Obama administration's decision Tuesday to give businesses with more than 50 employees another year to comply with a health insurance mandate has been ascribed to incompetence or politically motivated fear. Whatever the reasoning, though, it's not going to affect that many employers.

The mandate was criticized for offering employers a hiring disincentive: Those with, say, 52 employees would be encouraged to fire a few workers to avoid the mandate. But few businesses will likely be affected. Businesses with 20 to 99 employees make up less than 9 percent of all employer firms, according to the census.

And health coverage is incredibly high among such midsize firms. Some 87 percent of employers with 25 to 49 workers and 94 percent of employers with 50 to 199 employees offered health benefits in 2012, according to a Kaiser Family Foundation employer health benefits survey. In other words, the vast majority of firms with anywhere from 25 to 199 employees already offer the benefits. And this isn't exactly new news, as my colleague Margot Sanger-Katz pointed out Tuesday:

The employer mandate was expected to have "essentially no effect" on the number of people covered by their companies, according to a 2010 Rand analysis. Rand concluded that large employers would be motivated by their employees' demands more than the prospect of a financial penalty if they failed to offer insurance. The provision never applied to small businesses. (There will still be kinks to be worked out, as Washington and Lee professor Timothy Jost points out in a Health Affairs blog post, but they won't be fatal to the law's overall structure.)

There's still work to be done in order to comply, and employers have complained that the law is overly complicated. But few businesses will find themselves switching from offering no benefits whatsoever to having to insure dozens of employees in one go.