Is This Health-Care Reform's Worst Idea Yet?
The Senate Finance Committee does not want to propose an employer mandate to promote health-care coverage. But it doesn't want to let employers entirely off the hook, either. So it has come up with one of the worst ideas in recent memory: A so-called "free rider" tax. Under the proposal, employers with more than 50 workers would have to pay the subsidy costs for low-income workers who seek coverage in the Health Insurance Exchanges. But they wouldn't have to pay a dime for higher-income workers who did the same.
You can pretty much see where this is going: workers from low-income families become more expensive than workers from high-income families. As the Center for Budget and Policy Priorities explains, "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."
This would also happen on the back end. The free-rider proposal "would likely influence employer decisions about which of their employees to let go when they trim their workforces to cut costs, such as during a recession," writes CBPP. "Workers from low-income families would cost the firm significantly more to retain than other workers who are paid the same wage to do the same job." It could also subtly work against hiring minority workers, because they are more likely to come from low-income families, and disabled workers, because they are more likely to need health insurance and subsidies. You can argue that an employer mandate affects an employer's decision as to whether to hire another worker. But the free rider will change which type of workers they hire. It's a really, really bad idea.
August 7, 2009; 5:06 PM ET
Categories: Health Economics , Health Reform
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