Health Reform Employment Mandate
OK, Paul Krugman thinks this bill is far from perfect, but is a huge step in the right direction. He’s an economist. He should know. I’m not an economist. I’m an employer. Different view of things obviously. Here’s what I see:
The Senate health care bill includes a well-known “employer mandate” provision that would require employers to either offer a “qualified” health plan and pay 60 percent of the premium or pay an annual tax penalty of $750 per full-time employee.
What is less well-known is that the provision would also tax companies even if they do offer insurance — but only if they hire people from low- and moderate-income families who qualify for, and elect to accept, premium subsidies. And the tax penalty for hiring those employees — arguably the people who need jobs the most — would be a whopping $3,000 per employee per year.
The combination of this tax penalty and the rules for determining who qualifies for premium subsidies would encourage companies to engage in some new and repulsive forms of employment discrimination.
- First, family income — not how much this employee is paid by this company, but total family income — would have to be below four times the federal poverty level (FPL). The FPL depends primarily on family size; for 2009, four times the FPL would be $43,320 for a single adult with no children and $88,200 for a family of four (regardless of whether it is a single parent with three children or two parents and two children).
- Second, the premium share to be paid by the employee would have to be more than 9.8 percent of family income.
Note that in both cases, whether a company has to pay the $3,000 tax depends not on how much that company pays the employee but on the total income of all the employee’s family members from all sources. (Normally employers do not know the income of their employees’ family members, but the Senate bill calls for the IRS to tell employers which employees fall into this category on a monthly basis.
OK, first of all, either I pay a certain percentage of an employee’s health insurance, or I pay a $750 fine. No brainer. Assuming my portion of their health insurance is less than $65 a month, I just pay the fine and go on. Since they did have insurance, but now don’t, this doesn’t seem intuitive to me. However, that’s not the end of it. If an employee’s premium THEY are paying falls OVER 9.8% of their FAMILY’S income for the month, I could be “taxed” up to $3,000.
OK, raise your hands employers and human resource staff, how many of you have even the faintest idea how much your employee’s FAMILY earns? This is where it becomes beautiful. The IRS has to tell the employer which employees are eligible EACH MONTH.
Got that? Let me repeat that part again:
The IRS has to tell the employer which employees are eligible EACH MONTH.
How does the IRS know this?
The family’s income has to be less than four times the national poverty level. That’s $88,200 for a family of four. That sounds kinda crazy at face value, but there’s a fairly simple rule of thumb an employer can follow when trying to budget using this amazing scheme. There are only two states in the United States that have median household incomes that exceed four times the national poverty level, and one of them’s not even a state. DC and Connecticut. All the rest you can pretty much assume that if you’re in a position where it’s questionable whether you can provide health insurance or not, you can safely assume you’re in that 9.8% category.
Now, what this is all leading to is what I assumed would happen when this debate began. An employer is forced to limit exposure. The only way an average employer can do this is to limit bodies. Currently, due to the nature of work, we have a huge majority of part-time workers. This will no longer be economically feasible. Rather than having a staff of 219 staff, we’ll have a staff of about 60.
The immediate effect of this reform in this case will be 159 people losing their current health insurance, as well as their jobs. Thinking about hiring a part-time kid during summer break? Forget it unless their family’s fairly wealthy. In my case, that never happens.
For what it’s worth, this isn’t a scare tactic, this is a business decision. It’s not speculation. If the health care bill passes as presented, we will immediately start preparing for it by switching to a full time employment status only and laying off the rest.
You think 10% unemployment is bad, just wait.
Is this what health reform advocates had in mind? Is the change people wanted?