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Mr. Kristol, Mr. Capretta — Heads Up on Health Reform’s Employer Requirement

In recent days, critics of health reform’s requirement that large employers offer health coverage or pay a penalty have repeatedly and inaccurately cited an October 2009 CBPP paper to support their contention that it will discourage firms from hiring low-income workers.  This is sloppy work on their part.  As CBPP Senior Fellow Paul Van de Water explained last week, our paper criticized an early Senate Finance Committee version of the proposal.  Largely in response to our criticisms, policymakers essentially fixed the provision months before enacting health reform.

Since Paul’s post, we’ve learned that William Kristol has pointed to congressional testimony by James Capretta — which Paul cited as a prime example of serious misuse of our October 2009 paper — as a “must read” in the Weekly Standard. So, we’ll repeat what Paul wrote last week:

[Our October 2009] paper criticized a version of the so-called “employer mandate” that’s very different from the one enacted in health reform. . . .

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.

In other words, the powerful incentive our October 2009 paper described for large employers who don’t offer health coverage to avoid hiring low-income workers isn’t part of the final legislation.  To cite a CBPP critique of a problem that policymakers have addressed as though it applied to the legislation as enacted shows a lack of care by some critics who, too often, can’t resist latching on to anything to attack health reform.