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Senate's Proposed Employer Mandate has 'Deep Flaws'

John Commins, for HealthLeaders Media, August 7, 2009

The Senate Finance Committee proposal to impose an employer mandate to either provide health insurance to workers or subsidize their health costs has "deep flaws" that would make it too expensive to hire lower-wage earners, minorities, women, and disabled workers, according to a new analysis by the Center for Budget and Policy Priorities.

"The fact that low-income workers would cost an employer up to several thousand dollars more to perform the same job could not easily be overcome," according to the analysis.

The CBPP analysis, written by Judith Solomon and Robert Greenstein, maintains that the employer mandate is an essential component of healthcare reform. However, they say the proposal that Finance Committee negotiators is considering creates more problems than it solves.

Under the Senate Finance proposal, the CBPP says, employers with 50 or more employees who do not offer health coverage would have to pay the average subsidy cost per person for all employees who purchase coverage through a new health insurance exchange and qualify for a subsidy because their family income is below 300% percent of the poverty line.

However, employers wouldn't have to contribute to the health insurance costs of employees with higher family incomes. Thus, the proposal would make it considerably more expensive for employers who do not offer insurance to hire workers from lower-income families than workers from higher-income backgrounds to do the same job.

As a result, CBPP says, employers would have strong incentives to hire people who have a spouse with a good income or health coverage, teenagers whose parents make a decent living, and people without children, because the eligibility limit for the subsidies in the new health insurance exchanges will increase with family size. Low-income women with children in one-earner families would be particularly disadvantaged.

While language could be included to try to ban discriminatory effects, CBPP says it would be virtually impossible to enforce. For example, it would be difficult to prove in court that an employer has passed over one applicant and hired another to avoid the health surcharge. Moreover, most low-income job applicants who do not get hired could not afford to hire attorneys. Those workers who might sue could wait months and years for a settlement.

The study also found that the Senate Finance proposal would:

  • Create differential treatment of workers based on their family income and would likely influence decisions about which employees to let go when workforces are cut, such as during a recession.
  • Unintentionally discriminate in hiring and firing based on race because minorities are more likely to have lower family incomes than non-minorities.
  • Discourage the hiring of low-income people with disabilities who will need subsidies if they can't get coverage through their employer—and who will not have an option of forgoing coverage given their health conditions. It would not be possible to provide an exemption from this requirement for people with disabilities, because the health insurance exchanges will not be conducting disability determinations.

The CBPP falls in line with a July 15 Congressional Budget Office study, which suggests that proposals similar to what Senate Finance is considering would lead to greater job losses than a traditional "pay or play" requirement. Under a traditional "play-or-pay" mandate, employers who don't offer coverage pay a modest dollar amount per worker or a modest percentage of payroll and are able to cover those costs by paying lower wages than they otherwise would.

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