Enzi Motion to Commit to Strike Employer Mandate
Here’s my colleague Jon Lieber’s analysis of Senator Enzi’s motion to strike the employer mandate…
Senator Enzi has offered a motion to commit the health care bill to the Finance Committee with instructions to strike the employer mandate with an offset.Summary• The health care bill requires that all employers with at least 50 full-time employees offer their employees the “opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan.”
• Minimum essential coverage generally means coverage that covers at least 60 percent of the actuarial value of a full-coverage plan.
• If an employer fails to offer such coverage, and at least one full-time employee of the employer receives a premium tax credit through the exchanges created by the bill, a tax is levied on the employer equal to $2,000 multiplied by the total number of employees employed by the employer (the first 30 employees are exempt from that count).
• This is known as a “free rider” penalty, since it is designed to punish employers who do not offer government-approved coverage, if their employees receive a tax credit in the exchange.
• This tax raises $52 billion over the next ten years.
• The Enzi MTC would require the Senate Finance Committee to strike this job-killing mandate, and pay for it with an offset.Considerations• The free rider penalty is a tax on workers and take-home pay.
• The Congressional Budget Office has repeatedly said that the increased costs of the employer mandate will be shifted to workers in the form of lower wages.
o Employers may also respond by cutting jobs (particularly for low-income workers), outsourcing more jobs, or relying more on part-time workers.
• An employer mandate will be especially harmful for small businesses that employ low-income wage workers at or near the minimum wage.
o A study by Harvard Professor Kate Baicker found that low-income, minority workers would be the most affected by an employer mandate. Thus, among the uninsured, those with the least education face the highest risk of losing their jobs under employer mandates.
• Employers may respond to the higher costs resulting from the mandate with fewer hours, increased outsourcing, or reliance on part-time workers.
• Workers, not employers, bear the cost of employer mandates. Then Congressional Budget Office Director Peter Orszag said, “The economic evidence is overwhelming, the theory is overwhelming, that when your firm pays for your health insurance you actually pay through reduced take-home pay. The firm is not giving that to you for free. Your other wages or what have you are reduced as a result. I don’t think most workers realize that.” This mandate would require firms to pay for health insurance, resulting in lower wages.
• The CBO wrote that creating different penalties for full and part time workers “would increase incentives for firms to replace full-time employees with more part-time or temporary workers.”
• According to CBO, a “free-rider” penalty cause the greatest losses disproportionally among low-income workers.
• Mandating that employers offer coverage is an additional financial burden on businesses, especially small businesses, which are already struggling with a slow economy and rapidly escalating health care costs.
• Small and medium sized businesses, even those with over 50 employees, are a primary engine of economic growth and are particularly vulnerable to any new costs or mandates.