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Senate health care bill punishes employers who hire people who need jobs the most

Original post made by Beth, Another Pleasanton neighborhood, on Dec 23, 2009

Do you still think the Democrats are for the "little guy" and actually care about their employment? Wake up! (This goes for you, especially, Janna!) Democrats only want people to remain on welfare. (Read on...)

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December 17, 2009
Employment Discrimination in the Senate Health Care Bill
by Robert A. Book, Ph.D.
WebMemo #2737
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.

Who Would Qualify for a Subsidy?

There are two criteria for qualifying for a subsidy under the Senate bill:

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[1]; 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.)

Here are some examples of how these provisions would play out.

The Single Parent v. the "Second Income." Suppose an employer is faced with two applicants for the same job at the same pay: a single parent of three children and a married parent with two children and a working spouse.

In this case, the "four times FPL" threshold is about the same for both applicants, since they both have the same family size.[2] However, once hired, the applicant with the working spouse will have a higher family income, so the single parent is more likely to qualify for a premium subsidy -- which means the company is more likely to face a $3,000 penalty if it hires the single parent. Which means, of course, that it is more likely to hire the applicant with the working spouse.

The Teenager v. the Adult. Now suppose a company has an entry-level job, and the two applicants are a teenager and an adult. Suppose the teenager has one or two working parents and is still a dependent on their tax return.

In this case, the teenager may have a larger family size (unless the adult has children) but most likely has a much higher family income. The teenager may be covered under a parent's health plan, but even if not, the teenager's "family income" includes the parents' income. The teenager is not likely to generate a $3,000 tax penalty for the employer, but the adult is -- especially if the adult has children to support. So the employer has a clear incentive to hire the teenager rather than the adult -- especially if the adult is a single parent.

The Illegal Alien v. the Legal Resident. The bill contains provisions that bar illegal aliens from receiving premium subsidies. Putting aside the controversy over whether those provisions would be enforceable in practice, consider them at face value and assume that an employer faces two applicants, one of whom is an illegal alien and the other a U.S. citizen or legal resident alien.

Of course, the employer is not supposed to hire the illegal alien in the first place, but the presence of millions of employed illegal aliens means such laws are not effectively enforced. However, if one must prove legal residence to receive a premium subsidy, the illegal alien is not likely to apply for, much less receive, the subsidy. If there is no subsidy, there is no $3,000 tax penalty for the employer. If the job is low-paying and any (legal resident) employee is likely to qualify for a subsidy, the employer's incentive is to hire the illegal alien rather than pay a $3,000 tax penalty for hiring a U.S. citizen or legal immigrant.

The Double Layoff. Suppose an employee has a working spouse, and their combined income is high enough for their family size that they do not get a subsidy and do not generate a $3,000 penalty for each employer. Then, suppose one spouse loses his or her job and with it the family's health insurance -- and the other spouse's income is, by itself, low enough to qualify the family for a subsidy.

In that case, the IRS will notify the other spouse's employer that they now have to subsidize an employee and that they have to start paying the $3,000-a-year tax (monthly, at the rate of $250 per month). This sudden increase in employment cost will encourage the other spouse's employer to lay off the second spouse as well, leaving both of them unemployed.

The only way for the couple to avoid this outcome would be to go without insurance -- but that would require them to pay an individual tax penalty of $1,500 a year for both of them going uninsured (more if they have children, up to a maximum of $2,250 per year) -- and with one fewer job, they would have less money available to pay the penalty.

The Bottom Line: Taking Jobs from People Who Need Them the Most

In each case, the bottom line is that the Senate health care bill punishes employers who hire people who need jobs the most -- and by doing so makes it harder for people who need jobs the most to find employment. Because of the way the employer mandate for health insurance is structured, employers in effect face a $3,000-per-year incentive to hire people from higher-income families and smaller families over those from poorer and larger families.

The result would be a particularly insidious and repulsive -- but legally encouraged -- form of job discrimination against applicants who need the jobs the most. Congressional leaders may call this "health care reform" but for many poor families, it would be a one-way ticket to unemployment.

Robert A. Book, Ph.D., is Senior Research Fellow in Health Economics in the Center for Data Analysis at The Heritage Foundation.

[1]U.S. Department of Health and Human Services, "The 2009 HHS Poverty Guidelines," at Web Link (December 16, 2009).

[2]There are two slightly different federal definitions of FPL, and the bill is unclear as to which would apply for purposes of determining subsidies. However, the difference in this case is only $100 (or for four times the FPL, $400). This is vastly outweighed by the size of the tax penalty ($3,000).

Comments (9)

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Posted by Cholo
a resident of Livermore
on Dec 23, 2009 at 11:16 am

It's one thing to have a policy and it's up to citizens to devise ways to find loopholes to out-slick the government.

There are too many people that don't want to work and there are enough "illegals" to make up the slack.

The US is too invested in not saving the illegals because they help make the economy tick.

Illegals deserve their fair and forever and they will also receive benefits, no ifs ands or buts...accept it.


cut 'n paste

Like this comment
Posted by Cholo
a resident of Livermore
on Dec 23, 2009 at 11:18 am

oops...where's my free baby blanket so that I can cover over my mistake: The US is too invested in saving the illegals because they help make the economy tick.

Like this comment
Posted by Dominic
a resident of Del Prado
on Dec 25, 2009 at 10:09 am

The bottom line is Democratic leadership is not for the people, it is motivated by their own greed, power and countrol. It's a shame really, not so many years ago, dems stood for some good things. These days seem to be over...This Healtcare billis irresponsible, and not good for anyone as it takes rights and freedoms away from all of us, it reduces personal responsiblity and is bad for everyone, including immigrants. The lies people beleive these days is quite remarkable.

It's time we rise up locally to start sending a message through our voting...Join me and help remove the "not stand for the people, but vote almost always along democratic party agenda lines," Jerry McNerney from office this next election cycle...

Like this comment
Posted by Janna
a resident of Dublin
on Dec 25, 2009 at 10:29 am

Dear Beth,

I think you may have a teeny weeny obsession with me. ;->

The GOP is the party of greed, fear, and selfishness. I don't like the outcome so far of health care right now, but you'll never convince me republicanism is moral or for the people in any way. BTW, The Heritage Foundation? Thanks for the stats from the "Don't Think" tank.

You're starting to look a little stalker-ish just so you know.

Janna :-)

Like this comment
Posted by Dominic
a resident of Del Prado
on Dec 25, 2009 at 10:56 am

The GOP is a part of greed, fear and selfishness? Perhaps this is what happens when facts and history are not examined and folks only rely upon liberal news sources for information. That is exactly what liberals want, to do your thinking for you.

The GOP is certainly not without fault, nor perfect...but when it comes to morality and looking out for the individual they are head and shoulders above the current democratic party. Don't let prjudice blind you from reality...

Fact is, the positions of JFK democrats and even JFK himself who stood for cutting taxes, are now republican values and no longer democrat.

Like this comment
Posted by Arroyo
a resident of Another Pleasanton neighborhood
on Dec 25, 2009 at 12:12 pm

It won't be long before the rank and file members in Organized Labor unions realize that their hierarchy has "thrown them under the bus" to save Obama's credibility. Their health benefits will now be taxed and their leaders could have prevented it.

Like this comment
Posted by Ken in South Pleasanton
a resident of Downtown
on Dec 25, 2009 at 12:35 pm

First, Merry Christmas to all. Second, I'm sure we will all hear the much-repeated government phrase "unintended consequences" in the following months and years. This is a bi-partisan comment because it applies to all our legislators who fill well-meaning legislation with pork-ridden amendments to line their own pockets without thinking long-term about the consequences of their selfish actions.

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Posted by Cholo
a resident of Livermore
on Dec 25, 2009 at 1:11 pm

I think that Beth has a secret CRUSH on J....!!! I used to have crushes in grade school but I guess it's a bit different when you're an ole hen? By old age, I guess it's best understood as an obsession, staling, etc. etc. etc. yup...that's what it is...

be advised: she is the same person who had a baby and went totally postal when a group of kind women offered her a hand made baby blanket and she said, how dare you, I've got my own blanket! did i miss something? i was floored when I read Beth's post...after that i said to myself...beezy le bubble lives!

don't say you haven't been warned...

Like this comment
Posted by Cholo
a resident of Livermore
on Dec 25, 2009 at 1:12 pm

Correction: stalking

i rest my case...

Sorry, but further commenting on this topic has been closed.

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