The Practical Relevance of the Employer Mandate Delay


At most, the employer mandate would produce a roughly 40 bp gain in total national health spending. In reality the effect is likely to be even smaller. Less well compensated employees at smaller firms may continue to refuse coverage, and/or purchase coverage that is substantially less generous than purchased by employees at larger firms, mitigating the mandate’s demand effects

The mandate seems to have negatively affected hiring and job quality at a critical point in the economic and political cycles, which would seem to have more to do with its delay than with the reasons offered (need for more time to clarify reporting requirements)

Anecdotal evidence of rate-shock in small group markets, and of key underwriters declining to participate in (or choosing to exit) certain markets, raises the question of whether insurer participation has been sufficient to produce well-functioning SHOP exchanges in all states. If not, this implies a need for significant structural change. This issue becomes increasingly clear in the coming weeks as data on plans and premiums emerges in most states

We’re unconcerned by the effect of the delay on overall demand, and continue to recommend US-focused / volume-levered names as a core element of healthcare portfolios

For our full research notes, please visit our published research site

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