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Are Employer Health Insurance Mandates a Viable Policy Option?

Dr. Aaron Yelowitz

Department of Economics

335 B&E Building

University of Kentucky

Lexington, KY 40506-0034

URL: www.Yelowitz.com

E-mail: aaron@uky.edu

Phone: 859-257-7634

December 20, 2005

Abstract: In California and elsewhere, pay-or-play employer mandates have been proposed as a way of reducing the number of uninsured, and also as a possible avenue for slowing the rising costs of health care. In this paper, I reexamine some assertions that are often presented about employer mandates and arrive at different conclusions. I also discuss some of the main economic avenues through which employer mandates may operate in the labor market, and offer concrete suggestions for policymakers on how to reduce the economic cost of such mandates. Based on existing evidence, an “opt-out” employer mandate for catastrophic health care coverage for workers-only, where employees shouldered significantly more of the premiums than is typically proposed, has the potential to reduce the number of uninsured while reducing (but not eliminating) the negative effects on the labor market.