While the House reconciliation bill keeps many of the Senate provisions that will already slow economic growth, the reconciliation bill goes even farther in punishing employers who do not offer sufficient health care. These penalties will slow employment growth and given employers a disincentive to hire anyone who purchases subsidized health care.
Punishing Businesses That Hire Low-Income Workers
Businesses that already offer insurance can be affected by the reconciliation bill. Even if the employer does provide health insurance, if any employees qualify for, and accept, a premium subsidy on the basis of their family size and family income, the employer will have to pay a penalty of $3,000 per year for each qualifying employee. Even more businesses are in danger of this penalty since the reconciliation bill ups the subsidy amount, meaning that more workers could take it. This penalty depends not on how much that employer pays, but on the employees total family income from all jobs held by all family members. This means employers would have to know the income of each employee’s other family members to know whether they need to pay the tax. The bill requires that the IRS provide this family information to the employer.
Because qualifications for that taxpayer subsidy depend on the worker’s family size and family income, a worker with more dependents would be more likely to qualify, and one with a working spouse or other family members would be less likely to qualify.
Employers faced with the choice of hiring—for the same job at the same pay—say, a single parent of three, and a parent of two with a working spouse (or a teenager with working parent(s)), the employer could face a $3,000 annual penalty for hiring the single parent—and is therefore likely to deny that person the job.
Likewise, if one company lays off an employee with a working spouse, that could generate a $3,000 tax penalty for the other spouse’s employer—unless the other employer lays off the other spouse as well.
If the employer hires two people in different family situations for the same job at the same pay, they could have vastly different health insurance options based on what their other family members are making. The one with another working family member would have to take a plan from one of their employers and pay up to 40 percent of the cost or face tax penalties; the one with no other working family members could choose either the employer’s plan or any plan in the exchange – in the latter case, with a subsidy paid for by the other workers’ taxes.
Hammering Businesses Employing 50 or More Workers
Businesses with 50 or more workers will now face higher tax penalties, which lawmakers have increased from $750 to $2,000 per full-time employee (FTE) as part of the employer penalty mandate. The $2,000 per FTE penalty will be assessed as soon as one of the FTEs receives a premium tax credit or cost-sharing subsidy to participate in the established state health exchanges.
The penalty will not, however, apply on the first 30 workers. For example, if a business expands from 49 to 50 FTEs, then the marginal cost of this expansion will be $2,000 times 20 FTEs, or $40,000. The penalty will impact medium-sized companies as well, where a firm with 75 workers and subject to the employer penalty will have to absorb $90,000 in addition costs (or approximately 6 percent of the average annual payroll for a company with 75 workers).
Last, the employer penalty will negatively impact a significant share of US businesses, and could create a strong disincentive for a large share of companies to not expand firm-level employment. Using data from the Small Business Administration, there are approximately 190,000 total firms with 50 to 200 workers that could face this penalty. Moreover, there are 116,000 total firms with 35 to 49 workers that could face the per FTE penalty, if they were to move beyond the 50 worker threshold. This employer penalty would therefore reach a large number of US companies, and will dramatically affect these companies’ per-employee costs and their allocation of labor.
Co-authored by John Ligon.
Yesterday FOX News Special Report interviewed President Barack Obama about the process for passing the President’s controversial and unpopular health care proposal. Fox’s Bret Baier asked some pointed questions to see if the President supported or would even talk about the controversial “Slaughter Rule” being considered by the House to pass Obamacare. The President would not directly answer repeated questions about a potentially unconstitutional Deem and Pass rule, but he seemed to tacitly support the idea.
There is no precedent for legislation of this scale to be jammed through Congress by using a deeming resolution in concert with a reconciliation measure. Liberal leaders in the House argue that because Republicans used this potentially unconstitutional procedure in the past, they should be allowed to do so now on a much larger scale. Article 1, Section 7 of the Constitution states, “Every Bill which shall have passed the House of Representatives and the Senate, shall, before it becomes a Law, be presented to the President of the United States.” This procedure, on it’s face, seems to violate the letter of the constitution.
The President was asked by Bret Baier about the Slaughter Rule:
FOX News Reporter Bret Baier: So you support the Deem and Pass Rule?
President Barack Obama: What I am saying is whatever they end up voting on, and I hope it is going to be sometime this week, it is going to be a vote for or against my health care proposal. And that’s what matters. And that’s what people are going to judge this on.
The President seemed to abide by Congressman Chris Van Hollen’s (D-MD) advice to avoid talking about the process. Obama would not directly answer this question, but seemed to tacitly endorse the potentially unconstitutional strategy with his statement that he hoped for a vote “sometime this week.” The President does not seem troubled by the constitutional concerns of the Slaughter Rule strategy. The Wall Street Journal Op Ed agrees with the argument that this controversial procedure is unprecedented because never before has Congress passed a comprehensive reform bill using this tactic. Baier pressed the President:
Baier: Monday in Ohio, you called for courage in this health care debate. At the same time, Pelosi was saying this to reporters about the Deem and Pass rule, “I like it, this scenario, because people don’t have to vote on the Senate bill.” Is that the type of courage you are talking about?
Obama: Well, here is what’s taking place. We both know what is going on. You have got a Senate bill that was passed that had provisions that needed to be changed. Right. People were concerned about the fix that only fixed Nebraska and didn’t fix the rest of the States. Now a lot of the members of the House legitimately say, we want to vote on a package as the President has proposed that has those fixes embedded in them. Now that may mean that they have to sequence the votes, but the ultimate vote they are taking is whether they believe in the proposal that I have put forward.
Baier seemed to be trying to get the President to condemn Members of Congress for dodging a direct vote and showing no courage in structuring a vote that would allow members to claim that they never voted directly for the Senate passed version of Obamacare while that same legislation would be deemed passed by the House and sent to the President for his signature. Pelosi’s intent is to avoid a direct vote on the Senate bill seems to be a violation of the spirit if not the clear language of the Constitution. The President has taken an oath to uphold the Constitution, as have members of Congress, they need to put more thought into upholding that oath during this contentious and divisive process.