Now that the Senate Finance Committee has passed a health reform bill, it must now be melded with the variation passed by the Senate Heath, Education, Labor and Pensions Committee. And that amalgamation, should it pass the Senate, will then have to be reconciled with the version that passes the House — itself the product of three separate committees. Much is the same across the three bills, but not the employer mandate.
The different mandates would have very different effects on businesses. We’ve already seen (here, here, and here) how one regional convenience store chain might react to the Senate Finance Committee’s plan — not only would it not offer insurance to the employees who don’t now have it, but it might even cancel coverage for some who do. How might this company respond to the other proposals?
The Senate Health, Education, Labor and Pensions Committee, chaired until his death by Edward Kennedy, came up with a slightly stiffer measure. Here, companies would have to pay $750 a year for each employee who works a 40-hour week but is not offered the minimum coverage (defined both in terms of benefits and a contribution of at least 60 percent of premiums) and $375 for each part-time employee.
The H.E.L.P. (love that acronym!) mandate would apply only to companies with more than 25 employees (excluding seasonal staff), and the first 25 are exempted. (That is, a business with 30 workers that does not offer the minimum required coverage will pay the mandate penalty on just four of them.) Under this mandate variation, companies wouldn’t be able to avoid responsibility for health care costs altogether by reclassifying full-time employees as part-timers, as in the Finance committee bill, but they could halve those costs simply by cutting employee work schedules to 39 hours. A company with 50 full-time employees could save around $9,000 by doing this.
Here’s how it would work out for our poorly paying convenience store chain, using the number of workers supplied by the commenter Ann Arnold, a retired Chicago labor lawyer who knows the company. Remember, it has 250 part-time and about 195 full-time hourly employees who get no insurance. It also has 125 salaried employees who are covered, including 92 low-wage store managers. Under the H.E.L.P. mandate, the company would pay a $240,000 penalty on its uninsured full- and part-time staff. From that, however, we must now subtract the 25-worker exemption, which could range from $9,375 if all the exempted employees are part-timers to $18,750 if they’re all full-time. (The law leaves it up to the health-care regulators to figure how to constitute the exemption.) Ultimately, the company’s total penalty would fall between $221,250 and $230,625. Unless, that is, the owners decide to reclassify its full-time uninsured to part-timers — that would reduce the penalty by $71,250, after adding back enough part-timers to cover the same total hours.
Would the company drop existing coverage for its low-paid managers, an expense that runs $808,128 a year? The free ride for doing so under the Finance Committee bill wouldn’t be available here. Instead, the maneuver would set our company back another $69,000, which, coupled with the raises that presumably would be necessary to make those employees whole, would make the choice much less stark. But Ms. Arnold’s logic on the Finance bill applies here, too: Workers wouldn’t notice a difference because they’d be eligible for government-subsidized replacement coverage, while the savings to the company ($739,128, the difference between $808,128 and $69,000) could be enough to turn a marginal business into a lucrative one. So why wouldn’t the company make the switch?
An early study by the C.B.O., conducted before the committee loosened the mandate somewhat, concludes that after an early bounce, the number of people with employer coverage would increase only modestly (up one million people) compared to a an unreformed market.
The mandates in the House bills stand in stark contrast to their Senate cousins for their stringency. The play portion of the House bills requires businesses to do several things. First, they must offer qualified insurance to every employee. Second, they must shoulder most of the premium cost — 72.5 percent of individual policies, 65 percent of family coverage. (For part-timers, the required premium contribution is proportionally smaller, based on the number of hours worked.) Third, when employees decline an offer that is unaffordable and instead find subsidized coverage on the health insurance exchange created by the bill, the company must pitch in by contributing 8 percent of its average wage for each worker.
If a company does not elect to take all three of those steps, it must pay 8 percent of its total wages as a single annual excise tax. The company can offer coverage to full-time staff but not to part-time staff. In that case, the excise tax applies just to the part-time wages.
The penalties are phased in for small businesses; the smallest companies are exempted altogether. (There are two competing small business exemptions in the House. One, approved by the Energy and Commerce Committee, excludes businesses with a payroll below $500,000, with the tax rising incrementally to 8 percent when payroll reaches $750,000. The other phases in from $250,000 to $400,000.)
The House bills don’t permit our convenience store business to pick and choose among its full-time staff, so if the company refuses coverage to its full-time hourly workers, it can’t offer it to salaried staff, either, without facing the full tax. But Ms. Arnold says that the chain simply can’t afford to insure any of its hourly clerks — that would nearly quadruple its health costs. The solution, she says, is to drop coverage for everybody, which costs the company nearly $1.1 million, and then give raises to key employees that cover the cost of buying insurance on their own.
Such a decision would not come cheaply. Ms. Arnold says the company’s payroll is nearly $9 million; the tax would amount to $720,000. Once the company factors in raises to senior staff — and the excise tax on those raises — it will not have saved any money at all. And even though the store managers would be eligible for subsidies under the House bill, they’d still face some additional out-of-pocket premium costs. So to retain those hard-working employees, the company probably will have to give them raises as well.
Keep in mind that under all three mandates, the businesses most likely to drop coverage are those with the lowest-paid employees — and that in all of these cases, the smallest businesses are partly or wholly exempted from the mandate. But if the House approach still sounds draconian, it’s only in contrast to the muddled proposals in the Senate, which are at best symbolic and at worst counterproductive. And this is borne out by the C.B.O. analysis: as we’ve reported, while under the House version some three million employees would lose the offer of coverage they’d otherwise have without reform, many more employees would eventually get new workplace insurance for the first time. In all, two to four million additional people would get employer-sponsored insurance previously unavailable to them, much more than in either Senate proposal.
