The independent Mercatus Center at George Mason University has given a grade of “F” to the ObamaCare Health Insurance Exchanges regulation. The center studies the anticipated results and economic effects of proposed regulations. In other words, their researchers evaluate whether regulations are likely to accomplish what their supporters say they will.

The Mercatus center delivered its “Regulatory Report Card” on the Health Insurance Exchanges, the set of rules that states will use to set up online health insurance marketplaces. These virtual marketplaces will allow individuals and small employers to compare available private health insurance options on the basis of price, quality, and other factors. The Exchanges, which are scheduled to be in effect by January 1, 2014, are, next to the individual mandate upon which ObamaCare is based, crucial to the law’s ability to achieve its stated goal of expanding access to health insurance to the currently uninsured. Ultimately, they will be used to distribute $460 billion in federal health subsidies, through the year 2019.

The Health Insurance Exchanges regulation received only 42% of potential points (25 out of 60) on the Mercatus “Report Card.” The score of 25 points is the second lowest score the Mercatus Center has issued for 2011 regulations. The Exchanges were measured according to 12 criteria covering three broad categories: Openness, Analysis and Use. For each criterion, the researchers assign a score ranging from 0 to 5, with “5″ being the highest score on any given criterion. Some of the highlights are below:

In the Openness category, ObamaCare’s Exchanges received the lowest score of “2″ on the ease with which someone could find the regulation online. Verifiability of the assumptions used in the regulation’s analysis and the data used to support it were both given scores of “3,” with comments that the regulation relies heavily upon analyses performed by agencies such as the Congressional Budget Office (CBO). The regulation received a score of “4″ on its ability to be understood by an informed layperson. Interestingly, the researchers comment that the Health Insurance Exchanges regulation is “light reading” for someone who is “informed,” but due, in part, to the fact that there is little detail provided. However, as we have come to discover in ObamaCare, the devil is, indeed, in the details.

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Both the House and Senate versions of the healthcare reform bill would require employers above a certain size to provide health insurance for their workers or face some sort of penalty. The House bill that passed last month would require employers to pay an 8% additional payroll tax for not insuring their workers. The Senate bill now under consideration is much less punitive, requiring employers who do not provide insurance to pay a $750 annual fee per full-time worker, but only if one or more of their employees receive a government subsidy in the insurance exchange.

Quite a difference between the two bills. By way of example, take an employee earning $50,000 per year. Under the House bill, an employer who did not provide insurance would be required to pay an additional tax of $4,000 to the federal government. Compared to only $750 under the Senate bill – a difference of more than 500%.

Now consider whether it would make more sense financially for the employer to provide insurance or pay the penalty. In our example above, under the House bill it would probably be close to a break-even if the employer is providing coverage only for the employee. According to the most recent data from the Bureau of Labor Statistics (BLS), the average monthly insurance premium for private industry employers across all worker categories was $317.63. Or just over $3800 annualized (compared to the $4,000 penalty). However, it would be quite a bit more expensive if the employer was providing family coverage (BLS data: $737.68/mo – $8850/yr).

Obviously under the Senate bill it would be far less expensive for the employer to just pay the $750 penalty rather than provide the insurance.

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