Employer Mandates Given Boost

Wal-Mart supports the employer mandate as part of health reform. It baffles me that business has not been a stronger supporter of health reform over the years as the US health system is a major hinderance to competition with foreign producers. It is strange and a bit bittersweet that the employer mandate is the element that is getting the boost here by Wal-Mart.

As a political matter, the employer mandate is probably a good thing as the reform needs to be paid for and I imagine the public likes the idea of making “evil business” pay for it rather than paying for it directly through taxes. And as I’m one who does not let the perfect be the enemy of the good, I say ok.

But as a pure policy matter, the employer mandate isn’t exactly a great idea. First off, we shouldn’t really think of it as employers paying so much as employees. Employer health payments are basically competitive goods to wages in the budget. The issue of employer-sponsored health insurance is usually close to a zero-sum game in which neither will gain or lose too much.

However, in a broader perspective, employer contributions to health care join corporate taxes as an inefficient method of taxation. Businesses have the (imperfect) ability to pass taxes on to customers through higher prices or to employers through reduced wages while individuals do not have this ability. Business profit also ends up at the individual level anyway, through salaries and dividends. And while we would generally consider business profit as a positive thing, there are things we might tax (consumption) that we do actually want less of.

If it were feasible to pay for health reform through the removal of the employer health benefit tax exemption and the introduction of a VAT rather than using an employer mandate, it would be a far superior avenue. As it happens, those approaches have limited to no political viability while this one has more, so be it. Hopefully this will mark a positive step towards a reasonable health reform effort.