Consequences of the Employer Mandate Delay

This article, by Thom Lambert, is quite valuable. And the following excerpt is very revealing indeed:

. . . Suppose an employer wishes to provide $40,000 in total compensation to a 40 year-old employee who is the head of a four-person household. If the employer were to purchase a family policy for the employee (approximate cost $12,000/year), she would pay the employee $28,0000/year in cash. The employee would pay no payroll or income tax on the component of his compensation provided as health insurance, so he would receive an effective federal subsidy of $2,718 (22.65% * $12,000). If the employer were to drop health care coverage and thus drive the employee to an exchange, the employer would have to pay $2,000 and would therefore reduce to $38,000 the total amount she would pay the employee. The employee would then receive all his compensation — all $38,000 — as take-home pay. On the $12,000 that otherwise would have been paid as benefits, he’d have to pay $2,718 in tax, but he would now be eligible to purchase insurance on his own at a heavily subsidized rate. The ACA would limit his out-of-pocket insurance expense to 4.52% of annual income ($1,718), which means he would receive a whopping $10,282 subsidy on the $12,000 family policy. This employee is $5,564 better off if his employer drops coverage (costing him $4,718: $2,718 in foregone tax subsidy plus a penalty-induced compensation reduction of $2,000) and allows him to access the more generous subsidies available on state exchanges (benefiting him by $10,282).

This is the huge problem with the ACA’s Employer Mandate/subsidy scheme: The scheme as a whole creates incentives to dump lower-income employees on the subsidized exchanges. The Obama Administration’s politically expedient delay in implementation of the Employer Mandate does nothing to alleviate this difficulty. But it might
  help Nancy Pelosi get her old job back.

And that's all that really matters, isn't it?1

1. I know, I know; it's shocking to think that politics may be behind this. Still, it's worth mentioning.