Health Bill’s Just Bad Business

Original Article:

  • Author: Kristen Lopez Eastlick

  • Publication Date: November 2009

  • Newspaper: Boston Herald

  • Topics: Health Care

There has been a lot of noise when it comes to certain aspects of the health care bills moving through Congress: Will illegal immigrants be covered? Will funding be provided for abortions?
Will the legislation include a so-called public option?

Important questions all, but when it comes to the crucial question of how a new health care mandate will affect employers and their employees, things have been pretty quiet. This is unfortunate because the unintended consequences of such a mandate could be severe for all parties involved.

Two recent proposals – the bill passed in the House and the draft floated in Senate committee – contain what is called a pay-or-play mandate. This mandate would leave employers with one of two options, both of which involve added costs. They could either pay a tax on the wages of workers they don’t cover or they could play by contributing to the cost of health insurance for their employees.

The Congressional Budget Office estimates that between 2010 and 2019, an additional 14 million to 60 million Americans (depending on the bill in question) would receive coverage through their employer due to the mandate. But that analysis makes the bold assumption that employers won’t operate any differently – even as they absorb these new costs. It treats employer mandates as “free.”

As the cost of employee benefits increase, employers have to compensate elsewhere – usually in the form of lower wages. However, for those employees whose wages are already very low, there’s very little room to offset the cost of health care.

Research from Harvard University bears this point out. The added costs of mandated health coverage for full-time employees could lead to a decrease in employment of 1.7 million people – a number that does not include the impact of applying the mandate to part-time employees. In their conservative estimate, for every 10 percent increase in newly insured employees following a pay-or-play mandate, over 347,000 employees would find themselves out of a job.

Even more disturbing, researchers from Harvard and the University of Michigan found that workers at risk of job loss due to proposed employer mandates are more likely to be high school dropouts and minorities.

Policymakers should be wary about unintended consequences. Providing health care to uninsured Americans may be a laudable goal, but if we are not wary we may find ourselves doing more harm than good.
Kristen Lopez Eastlick is the senior economic analyst at the Employment Policies Institute.