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Heritage's Ernest Istook Schools Ed Schultz on How Obamacare Kills Jobs and Hurts Poor
Posted By Conn Carroll On November 30, 2009 @ 12:55 pm In Obamacare | Comments Disabled
Ed Schultz is a leftist radio personality who recently graduated to MSNBCs barely watched  opinion line up . Schultz still hosts his daily radio show  and recently had Heritage Foundation fellow Ernest Istook on to discuss Obamacare. The following exchange (audio here ) transpired:
SCHULTZ: OK, give us your new information from the Heritage Foundation on health care. Tell us how screwed up the Democrats are on that.
ISTOOK: Well, you know, I think this may be in the category of unintended consequences, although frankly it may be part of the cost control. As we’ve been going through this 2,000 pages that have been brought up for debate in the US Senate, evidently the penalties that they put upon employers if their, the people who work for them go into this public plan, this so-called insurance exchange …
SCHULTZ: Don’t tell me they’re going to jail! Please …
ISTOOK: No, this is not about that.
ISTOOK: This is, the penalty if you are an employer and you hire someone who then receives the federal subsidy because of their family income, you as the employer, the penalty can be $3,000 for each worker that you hire. Here’s the difficulty, Ed. It makes it more costly for a company to hire somebody such as a single mother with small children who may need the job the most of all. It makes it more expensive for a company to hire them than it does to hire someone, for example, who is married and has multiple sources of income for their household because the subsidies are based upon household income. The unintended consequence of this could be that the people who most need work will have the biggest difficulty in finding it.
SCHULTZ: I tell you what, you guys have really, uh, dug something up over at the Heritage Foundation on that one.
ISTOOK: No, we didn’t write the bill.
SCHULTZ: There is, congressman, if people break the law there’s going to be a fine, that’s basically what you’re saying.
ISTOOK: Well, I’m not talking about that aspect …
SCHULTZ: …. That’s if the mandate, that’s if the mandate is accepted in conference committee. I mean, we’re still, I mean, there is, there’s no guarantee that there’s going to be any fines anywhere.
ISTOOK: Well, again, this, are you telling me that there’s no guarantee that the main parts of the bill will go through? This is what they call the provision to stop what they call free riders, people that receive their health care through this government system that would be set up there and they’re saying if you as an employer have people who work for you who receive their health care in this fashion, you as the employer are going to have to pay extra into this system to the tune of approximately $3,000 per worker per year.
SCHULTZ: No! Ernie, that’s not true!
ISTOOK: Well, all you have to do is read the bill.
SCHULTZ: This is going, this is going to reduce the cost to small businesses across America.
ISTOOK: Surprise! The small businesses don’t believe you, Ed.
SCHULTZ: OK. Wow.
ISTOOK: Again, I mean …
SCHULTZ: I can’t take all this misinformation! I can’t take all this misinformation, I can’t! I don’t know what you guys do over there at the Heritage Foundation. Go to lunch! This is, this is going to relieve small business. This is one of the attacks that the Democrats have got to come up with on the Senate floor, is that the Republicans, you’re not for small business. If someone’s under $90,000 a year and works for a company of less than 50 employees, and that’s the majority, that’s over 95 percent of employees in this country are in that category, this is going to help, you know, Ralph’s Radiator Garage. There’s no …
ISTOOK: Ed, rather than read Democratic talking points I suggest you read the bill.
SCHULTZ: That’s a fact! That’s a fact! That’s an absolute fact! This is going to help small businesses! For you folks over at the Heritage Foundation to come out and say, well, you’re gonna get fined! For what?!
ISTOOK: Ed, the fines and the penalties are in the legislation. And …
SCHULTZ: You send me the page. It is not there!
Well, Ed, on page 350  of the Senate’s version of Obamacare it reads:
LARGE EMPLOYERS OFFERING COVERAGE WITH EMPLOYEES WHO QUALIFY FOR PREMIUM TAX CREDITS OR COST-SHARING REDUCTIONS.—
(1) IN GENERAL.—If—
(A) an applicable large employer offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, and
(B) 1 or more full-time employees of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee, then there is hereby imposed on the employer an assessable payment equal to the product of the number of full-time employees of the applicable large employer described in subparagraph (B) for such month and 400 percent of the applicable payment amount.
Later on page 352  we learn:
(1) APPLICABLE PAYMENT AMOUNT.—The term ‘applicable payment amount’ means, with respect to any month, 1?12 of $750.
Some quick math reveals: 12 * $750 = $750 a year, and 400% of $750 is $3,000. Or as Heritage scholar Robert Book explained :
Then there is the “employer responsibility” provision (Section 1511-1513, pages 346-357). Companies with more than 50 employees are required to offer qualified health plans – with a benefit package to be defined later by bureaucrats – to their full-time employees or pay a tax of $750 per full-time employee. That’s a lot cheaper than providing health insurance, and the $750 is just a tax – it doesn’t count towards the employee’s premium.
However, an employer who does offer qualifying insurance isn’t entirely off the hook. Suppose an employer offers insurance, but has an employee from a low-income family who qualifies for a premium subsidy in the “health insurance exchange” and decides to accept it. In that case, the employer is stuck with a tax penalty of $3,000 for that employee, and every other employee who qualifies and makes that same choice – unless it’s more than a quarter of the employees, in which case the tax is capped at $750 times the total number of full-time employees. (Workers will be permitted to opt out of their employer’s plan only if they qualify for a subsidy, have insurance through another family member, or if the employer covers less than 60 percent of their premium.)
Hurting the Poor. In other words, if a company has a lot of low-income workers, they can save money by dropping their health plan and just paying the $750 per-employee tax. (And they can make as many employees as possible part-time.) However, if they have mostly middle-income workers, they face a heavy penalty — $3,000 – every time they hire a worker from a low-income family. This goes by the employee’s family income, not the income the employee is paid by any particular company. So a company could save $3,000 by hiring, say, someone with a working spouse or a teenager with working parents, rather than a single mother with three children.
Even worse, if at least a quarter of the employees qualify for a premium subsidy based on their income and family size, the company is going to end up paying the same $750 per-employee tax – whether they offer insurance or not! So companies with a lot of low-income employees will essentially be encouraged to drop their health plans entire, dumping the remaining higher-income employees into the federal exchange at their own expense.
Seriously Bad Policy. In other words, employers will have a strong tax incentive to lay off the workers who need the jobs most – people without other sources of income.
How will employers know who those workers are? The federal officials will tell them when they send the tax bill (Section 1412).
Employer will be required (Section 1513) to inform the IRS of precisely who their employees are and during which months they carried insurance, to make sure the IRS knows who has to pay the “individual responsibility” penalty.
Thanks to NewsBusters  for listening to Ed Schultz.
Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2009/11/30/heritages-ernest-istook-schools-ed-schultz-on-how-obamacare-kills-jobs-and-hurts-poor/
URLs in this post:
 barely watched: http://tvbythenumbers.com/category/ratings/cable-news
 opinion line up: http://www.msnbc.msn.com/id/3096434/ns/msnbc_tv/
 his daily radio show: http://www.bigeddieradio.com/
 audio here: http://media.eyeblast.org/newsbusters/static/2009/11/2009-11-24-XAA-SCHULTZ-SchWithIstook.wav
 page 350: http://democrats.senate.gov/reform/patient-protection-affordable-care-act.pdf#page=350
 page 352: http://democrats.senate.gov/reform/patient-protection-affordable-care-act.pdf#page=352
 explained: http://www.foundry.org/2009/11/19/the-senate-health-bill-how-the-mandates-kill-jobs-and-punish-poor-workers/
 NewsBusters: http://newsbusters.org/blogs/jack-coleman/2009/11/28/heritage-foundations-ernest-istook-runs-circles-around-testy-ed-schult
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