Could a delay in the employer mandate be a boost to government run exchanges?

In 2011 we commented that while the health reform law, the ACA, had several positive intended consequences, it also could spawn several perverse effects and side-effects.

Now in an attempt to ward off some of those unintended consequences, the administration has delayed the employer mandate from 2014 to 2015. Reactions range from praise (from the unlikely alliance of Democrats and business groups), derision (from Republicans and right leaning think tanks) and bemusement or befuddlement (across the spectrum).

Of course, perturbing a portion of a complex system has ripple effects of its own. Here’s one that we’re thinking about. Let’s try it with a logic chain:

1. Employer mandate is postponed to 2015
2. But in 2014 we still have the individual mandate
3. Therefore, some people who would have been covered by their employers (many in defined contribution plans on private exchanges) will end up having to buy coverage as individuals (or doing without and paying the fine, if applicable)
4. Public exchanges (“marketplaces”) have been unsuccessful at attracting employers (Massachusetts for instance has less than 8000 group lives on its “Connector”)
5. But Public exchanges will have a monopoly on most people buying coverage as individuals (certainly on anyone availing of subsidies/ credits)
6. This suggests that an unintended consequence of this change is that it will benefit public exchanges and hurt private exchanges, especially those that are focused on the >50 defined contribution market

I wonder if the idea of supporting pubic exchanges played into the administration’s calculus or if it’s just a serendipitous benefit from their point of view. Either way, I’m sure they’ve thought about it – it’s just not part of the spin.

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