Promoting Employer Responsibility. Requires employers with 50 or more employees who do not offer coverage to their employees to pay $2,000 annually for each full‐time employee over the first 30 as long as one of their employees receives a tax credit. Precludes waiting periods over 90 days. Requires employers who offer coverage but whose employees receive tax credits to pay $3,000 for each worker receiving a tax credit up to an aggregate cap of $2000 per full‐time employee.
If this is an accurate summary, and I am reading this correctly, and cross-referencing properly, it means that employers will have an extremely strong incentive to stop hiring low-skilled people, and if they do, to not offer them health insurance.
Workers receive tax credits if their income is less than 400 percent of the poverty line. The first sentence implies that, if you have one worker making less money than this, you will have to pay a lot of money, but if everyone in your company is highly paid, you do not have to pay anything.
In most cases, low-skill labor and high-skill labor are substitutes. This means that companies usually have a choice between hiring a small number of highly skilled people or a large number of low-skilled people. Highly skilled people must be paid higher salaries, but they also bring more benefits to the company. This provision, like any government mandate that forces you to pay some fixed cost per worker, encourages companies to hire fewer low-skilled people and replace them with high-skilled people.
Therefore, I predict that income and employment inequality will continue to increase. Low-skilled people will find it harder and harder to get jobs, and they will be paid less. Whenever the government forces a company to pay money for each worker, the pay of that worker will go down by an equal amount in the long run.
I am not sure exactly what the last sentence means, but I think it relates to the following from the full text of the bill:
(3) CONTRIBUTION IN LIEU OF COVERAGE- Beginning with Y2, if an employee declines such offer but otherwise obtains coverage in an Exchange-participating health benefits plan ... the employer shall make a timely contribution to the Health Insurance Exchange with respect to each such employee in accordance with section 313.
In other words, if an employee chooses to decline the employer-provided health care but instead goes to the exchange, and if the employee is eligible for a subsidy, then the employer has to pay $3000 to the government.
I understand why this provision is in there. It is meant to discourage employers from offering substandard coverage. But if enough people choose to go to the exchanges, it would mean that offering health care is actually more expensive than not offering it. It may seem unlikely that people would choose to decline coverage, given that the employer must pay most of the costs, but that might happen if the exchange plans are good and if the government subsidy is high enough.
Consider what happens if the employer does hire a large number of low-skilled people. Assume that you run a factory that hires 80 workers who earn less than 400 percent of the poverty line, and 20 managers who earn more. If you do not offer any health care to anyone, you will have to pay $140,000. ( $2000 x (100-30)) If you do offer them health care, but they all choose to remain with their current exchange-based provider, you will have to pay $200,000. ( 80 x $3000 = $240,000, which is limited to the cap of $2000 X 100 ) As long as 47 or more of your workers decline your coverage, you have to pay more than $140,000.
Therefore, offering your employees health insurance could easily cost you more in taxes, over and above the actual costs of the health care. If my understanding is correct, then you will see many employers simply ceasing to offer health insurance in 2014. Paying the fine for not insuring people is cheaper than paying the fine for having people choose another option.
Actually, I hope that this is the case. Most economists understand that the current practice of getting health care through your employer causes a lot of problems. We would prefer a system where everyone bought health insurance with their own money and employers did not get involved. It may well be that this health care reform bill drives employers out completely and produces a market of nothing but individuals buying their own care on health exchanges, with poor people getting a cash subsidy. If it does, then that would be a big improvement.
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