The Foundry

The Senate Finance Committee’s proposed version of the “pay or play” employer mandate reportedly calls for employers who do not sponsor health insurance to pay a “free rider” tax equal to the subsidies their low-income employees would receive to buy insurance in a proposed national health insurance exchange.

Yesterday, health law expert Judith Solomon and former Carter Administration official Robert Greenstein of the liberal Center for Budget and Policy Priorities released a report explaining how this will be devastating to the employment prospects of low-income workers – and even more devastating to those workers with families to support.

These concerns are essentially the same as those we raised last month, which we call “taxing the poor to pay for health care.” The House bill also has similar defects.
As Solomon and Greenstein point out:

• 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, it would distort hiring decisions. Employers would have strong incentives to tilt hiring toward people who have a spouse with a good income (or have health coverage through a family member), teenagers whose parents make a decent living, and people without children (since 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 such discriminatory effects, it would be virtually impossible to enforce effectively. It would be extremely difficult to prove in court that an employer has passed over one applicant and hired another because of the health surcharge that employers would face if they hired people receiving health insurance subsidies. …
• Although this clearly is not intended, the proposal likely would have discriminatory racial effects on hiring and firing. As noted, it would discourage the hiring of lower-income people. And since minorities are more likely to have low family incomes than non-minorities, a larger share of prospective minority workers would likely be harmed.
• The proposal also could 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.

We are pleased to see that a liberal think tank has emphasized the same danger that the employer tax on lower-paid workers poses to those individuals and their families. We hope this leads to a consensus across the political spectrum that the tax, as well as an employer mandate, will cut the wages or destroy the jobs of those who can least afford to lose them, and has no place in health care reform.