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Axing Obamacare's employer mandate would do little harm, study says

A new analysis suggests that getting rid of Obamacare's mandate that employers offer workers affordable health coverage or pay a fine would have little effect on the overall insured rate—but could also lessen business opposition to the controversial law.

The research by experts at the Urban Institute found that scrapping the employer mandate due to take effect next year would reduce the number of people who as of 2016 would have some kind of insurance from 251.1 million to 250.9 million—a reduction of just 200,000 people.

John Holahan, one of the researchers, said that is a particularly small number, especially when considering the amount of "noise" generated by Obamacare opponents, who claim on the basis of anecdotal evidence that companies are reducing staff and employee hours to avoid employer mandate-related fines.

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And there are "so many other things you could do" to get the 200,000 people health coverage other than compelling employers to offer insurance, said Holahan. One of those things, he said, is having government increase subsidies available to people to buy insurance on Obamacare exchanges, as well as expanding eligibility for Medicaid.

"Our feeling is that we're not getting enough out of it [the employer mandate] to have to pay that price politically," said Holahan.

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Holahan, who is skeptical about claims that the mandate has had much effect on employment levels, nonetheless said that getting rid of the mandate would remove any incentive for employers to cut workforce size and hours to get under the rule's thresholds. That could in turn reduce the potential harm from the mandate to low-wage workers, who are more apt to work for employers liable to make such reductions.

"Eliminating the employer responsibility requirements should substantially diminish employer opposition to the" Affordable Care Act, the Urban Institute's report said. "In fact, without that burden, employers may play more of a role promoting expansion of coverage under the law."

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But the analysis also conceded that abandoning the looming mandate would come at a cost to the federal government.

There would be between $46 billion and $130 billion in extra, unexpected costs to the federal budget over the next decade, mostly from the elimination of fines on employers for not complying with that mandate, according to the research paper entitled "Why Not Just Eliminate the Employer Mandate?"

In addition to the lost fines, extra costs would come from the government having to subsidize coverage via Obamacare exchanges or the Medicaid program when those people went on that program after their employer didn't offer health coverage.

The research, conducted for the Robert Wood Johnson Foundation, underscores the complexity of the Affordable Care Act, and its often unexpected effects and costs, particularly when its requirements and mandates are adjusted.

The ACA requires that nearly all Americans have some form of health insurance in 2014 or pay a financial penalty equivalent in most cases to 1 percent of taxable income. This is known as the "individual mandate," and is considered crucial to the success of the law, because it both compels people to obtain coverage, and decreases the danger to insurers from having only sick people sign up for coverage.

Last October, government-run Obamacare exchanges began selling private insurance plans to help people who don't have health coverage through their employers comply with the individual mandate.

However, last summer the federal government postponed by one year, until 2015, the mandate that all employers with 50 or more full-time employees offer those workers affordable health insurance plans. Full time, under Obamacare's rules, was defined as working 30 or more hours per week.

This past February, the mandate was delayed yet again, partially. Employers with fewer than 100 workers will not have to comply with the mandate until 2016.

Rules dictating the fines for the employers covered by the law are complex. But essentially, those employers who don't offer affordable health coverage to workers are subject to fines totaling $2,000 per worker, after the first 30 workers.

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The vast majority of large employers will not be subject to those fines, because they already offer health coverage to workers. In fact, a Kaiser Family Foundation study found that 98 percent of companies with more than 200 workers already offered such coverage. The Urban Institute noted that about two-thirds of all employers currently offer health insurance.

"Most employers would not drop coverage if the penalties were eliminated," the Urban Institute's researchers wrote, noting the tax benefits companies gain by offering health insurance instead of higher pay. Salaries are subject to income and FICA taxes, while health insurance is nontaxable.

However, the research found that a total of about 500,000 workers would lose their employer-provided insurance if the mandate was eliminated, just 0.3 percent of the entire employer-insured workforce.

But the net increase in uninsured people nationally would be only about 200,000, because many of the workers who lost employer coverage would obtain insurance through either the Obamacare exchanges or through Medicaid, the Urban Institute found.

Holahan said that although he and the other researchers concluded that getting rid of the employer mandate "would be a good thing to do ... it's going to be tough" to actually get Congress to officially scrap the rule.

He noted that Obamacare and its provisions have been a political hot potato, with Republicans in Congress overwhelmingly opposed to the law, and Democrats routinely rebuffing efforts to repeal or weaken it.

—By CNBC's Dan Mangan.

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