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Obamacare's Employer Mandate Is Toast, And Democrats Are OK With That

Stocks in this article: CIAETUNH

NEW YORK (TheStreet) -- President Obama this week cheered the milestone 7 millionth person to sign up for the Affordable Care Act (ACA), but a growing opinion is spreading among Democrats that the law's employer mandate should go.

Former White House press secretary Robert Gibbs said in a speech on Wednesday that the mandate requiring employers with 50 or more full-time employees to offer medical coverage will be one of the first parts of the law to go.

The comments from Gibbs, who was an influential official within Obama's first administration, on the surface seem surprising: a Democrat once close to the president saying that lawmakers should kill a contentious piece of his landmark legislation. But policy experts have seen this coming.

"My view is that the employer mandate is one of the most vulnerable features of the law politically," Jonathan Oberlander, a University of North Carolina professor who researches health policy, said in a phone interview from Chapel Hill, N.C. "There are many things in the law that will lower costs for businesses ... but there are some businesses that would end up with higher costs."

The employer mandate could couch small- and medium-sized firms with higher costs.

Republicans since Obamacare passed in 2010 steeped much of their platform on repealing the law, and a GOP criticism -- especially during the 2012 election -- was that the ACA would hurt small businesses by forcing them to hire fewer employees.

Oberlander said it's true that small firms may have to pay more, but he says it's mid-sized companies that would take the biggest hit.

Democrats and Republicans have embraced party lines regarding Obamacare, but dropping the employer mandate is one that many members from both parties can support.

Republicans don't like the mandate because they oppose the idea of the government telling private sector entities what to do, but they also don't support the lack of tax incentives for individuals who don't pay for health care through an employer.

Proof of that is Rep. Paul Ryan's (R., Wisc.) proposed plan before the 2012 general election to offer a tax credit for families who buy private health insurance.

Some Democrats don't mind dumping the employer mandate because they would prefer to move away from businesses making health insurance decisions for individuals.

And, as Oberlander pointed out, while many businesses do provide health benefits, their natural existence to produce, earn revenue and turn a profit means they aren't particularly focused on health insurance. So it would be one less thing for firms to worry about, especially as the U.S. economy continues its slow rise from the depths of the Great Recession.

In fact, a major reason Bill Clinton couldn't get his health care plan passed in the 1990s was because many legislators opposed the president's proposed employer mandate, Oberlander said.

Politically, the employer mandate put Democrats in a lose-lose scenario when they were crafting the bill. Many politicians knew supporting the mandate just two years removed from the 2008 financial crisis would place an unanticipated burden on small businesses -- a sector that struggled to grow in the early phases post-recession. However, the choice to leave out the mandate meant more individuals would go to the exchanges, handing the cost to the government to pay.

"If you take it out the congressional budget score looks a lot worse," said Oberlander.

The employer mandate already has been delayed twice, and wilting Democratic support of the mandate suggests it soon may be cancelled.

-- Written by Joe Deaux in New York.

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