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Hawaii's Experience With An Employer Mandate

A couple of timely reports from the New York and San Francisco Fed banks out in recent days.

First, with news that Wal-Mart has thrown its support behind an employer mandate, the SF Fed takes a look at how such a system has fared in Hawaii, which passed legislation in 1974 requiring companies to provide coverage for most employees working 20 or more hours per week. Their findings provide a mixed bag for thinking about the cost, benefits, and reasons for considering a federal-level employer mandate.

While coverage did rise in Hawaii, many employers also started hiring more employees to work for less than 20 hours a week. At the same time, the researchers didn't find evidence that the mandate reduced wages or employment levels. This provides little support for the idea that an employer mandate would kill small businesses, as Clusterstock's Joe Weisenthal has argued.

But much of the current debate on health insurance centers around covering the millions of uninsured, which the researchers say still wouldn't happen under an employer mandate. From Tom Buchmueller, John Dinardo, and Rob Valletta of the SF Fed:

Although overall insurance coverage rates are unusually high in Hawaii, a substantial number of people remain uninsured, suggesting a need for alternative approaches if universal coverage is the ultimate goal.

Meanwhile, at the NY Fed, Andrew F. Haughwout and Ebiere Okah examine the effect of negative equity on foreclosure rates. They estimate that between 35-47% of homes with nonprime mortgages are underwater in 17 cities covered by the Case-Shiller housing price index. Astonishingly, almost 9 out 10 nonprime mortgages in Las Vegas and 8 out of 10 in Phoenix are underwater: 


Overall, nonprime borrowers are two to three times more likely to default than prime borrowers, and Haughwout and Okah estimate that another 10 percent drop in home prices (from December levels) would put another 1.5 million people at risk of defaulting.

--Zubin Jelveh