Thursday, August 06, 2009

Employer requirements and health reform

In the US, a lot of employers think it's their duty to offer health insurance to their employees. Indeed, this is the way the system has been set up. More than one small business owner testifying before Congress has done their utmost to maintain health insurance coverage even in the face of rising premium costs. Wal-Mart, in contrast, was castigated for not offering coverage - and its workers' wage levels meant that many of them had to seek coverage in Medicaid or other publicly subsidized insurance programs.

We want employer dollars on the table to pay for health reform. We want to be sure that employers won't simply dump their employees into the insurance exchange, where they may then need publicly subsidized insurance coverage or Medicaid. An economist might say that the employers would increase their employees' wages to reflect that they're now not providing health insurance. I'd say, that could happen in the long run, but there's no guarantee. Furthermore, we want money on the table specifically to pay for health reform.

As I mentioned in an earlier post, the Center on Budget and Policy Priorities had an excellent piece on how to structure an employer mandate. Briefly, employers would be assessed on their payroll (i.e. how much money in total they were spending on employee compensation). The requirement could be graduated. For example, a firm that didn't offer insurance might need to pay the government 1-3% of the first few hundred thousand dollars in payroll, going up to 8% for payroll amounts over a few million dollars.

CBPP has since revised that piece to update new legislation coming out of the Senate Finance Committee. Unfortunately, Finance is doing something a bit more drastic and ill-advised. In their legislation, employers not offering insurance would instead have to pay the cost of however much it costs the government to subsidize those people. This would only apply to people under 300% of the US federal poverty level, since these are the folks who would qualify for subsidies in the Finance bill (this amount, by the way, should ideally be raised to 350% or 400%).

This requirement could be dangerous. Judith Solomon, the author of the article, argues that employers would have a disincentive to hire low-income workers, particularly single mothers. Single mothers would be especially discriminated against since they are almost certainly the entire family's only earner, and it would be very difficult for them to exceed 300% of the poverty line in a low wage job. It's not really that hard for employers to determine or guess who the poor people or single mothers are, and it would be very difficult for those people to prove that they had been discriminated against.

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