Even though the health law’s “employer mandate” requires that companies with 50 or more workers pay a penalty of $2,000 per employee if they do not provide health care, many large companies now spend far more than that to offer coverage. As a result, Mr. Emanuel says they will be able to pay the penalty, give workers a raise and shed the burden of providing coverage by sending workers to the public exchanges.
The press is picking this up and focussing on the $2000 penalty and saying it is too small. But note the “give workers a raise” part. In a competitive labor market, just dumping workers on the exchanges without compensating them is not an option. They would exit and find jobs with companies that do offer them health insurance. To prevent this, you would have to raise their salaries. It would have been great if the NYT article could have added analysis of expense of this and hence whether the end of employer provided health insurance is really on the horizon.
Also, the big advantage Walmart etc have over the private exchanges is the ability to negotiate volume discounts. Is a decentralized private exchange ever going to be able to match those rates?
Economists of all stripes agree that there is no reason companies should also be in the business of providing health insurance to their employees. But there still seem to be many steps to there from here.