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Correcting the Record on Health Reform’s Employer Requirement

Critics of health reform’s employer responsibility requirement, which says that large employers must offer their workers health coverage or pay a penalty, are incorrectly using a paper we wrote in October 2009 to buttress their case.  (See here and here.)  That paper criticized a version of the so-called “employer mandate” that’s very different from the one enacted in health reform.

In fact, largely in response to the criticisms we raised in the paper, the Senate made substantial changes in the provision — changes that CBPP helped negotiate with the employer community and that substantially improved it.

Most of these improvements were in a version of health reform legislation that Senate Majority Leader Reid offered in November 2009.  The final health reform bill included further improvements.

Here’s the biggest change.  One provision that our October 2009 paper criticized would have required large employers that do not offer health coverage to pay a substantial fine for each low- and moderate-income worker who received a subsidy to buy coverage in a health insurance exchange.  That would have given companies an incentive to avoid hiring additional people from low- and moderate-income families.

In the law that was enacted, however, the size of the penalty for large employers that don’t offer coverage isn’t tied to the number of workers receiving subsidies.  Instead, non-offering employers will pay an annual penalty of $2,000 for every full-time employee beyond the first 30, as long as the employer has at least one employee who receives subsidized coverage in the local exchange, which large firms will find difficult to avoid.

Congress could have made even more improvements in the employer responsibility requirement, but the enacted provision is far better than the one we criticized in October 2009.