Senators Consider Dropping Required Employer Coverage From Health Care Reform Bill

By Staff Report

Jun. 30, 2009

Senators who are trying to craft a bipartisan health care reform proposal are considering dropping a requirement that all employers provide medical coverage to employees.

In its place would be a “free rider” provision requiring employers to pay for employees who get their health care with government assistance, according to an outline of the committee’s policy proposals.

The legislation from the Senate Finance Committee is expected to be released after the July Fourth holiday. Two other drafts of health care legislation, one in the Senate and another in the House, would require employers to provide health insurance to employees.

Retailers and other businesses that have minimum- or low-wage employees, such as Wal-Mart, oppose the free-rider clause, which they are describing as a backdoor mandate, says a source who asked not to be named but who is familiar with Wal-Mart’s health care policy stance. Around 2.5 percent of Wal-Mart employees receive Medicaid, according to the company.

The Center on Budget and Policy Priorities, a policy group whose work focuses on low- and moderate-income individuals and families, said the free-rider clause could discourage companies from hiring low-income workers and employees with disabilities. People who are poor or disabled are eligible for Medicaid.

The policy group said an employer mandate was preferable because most employers would choose to provide adequate coverage. The fine paid by employers that choose not to provide coverage could help the government recover the cost of insuring workers who do not get insurance through an employer.

Last week, Senate Finance Committee Chairman Max Baucus, D-Montana, said his committee had shaved about $600 million off the cost of health care reform. The new price tag, $1 trillion over 10 years, would be achieved by taxing health benefits and replacing an employer mandate with a free-rider provision.

According to the outline that became public last week, the free-rider clause would require employers to pay half the average national cost of Medicaid for every employee who receives Medicaid. An employer would have to pay the full cost of any tax credit an employee uses to purchase health insurance.

An employer would not have to pay into the cost of Medicaid if the company offered health insurance that was considered affordable. The proposal says health insurance is affordable if it costs no more than 12.5 percent of a worker’s income.

That proposal alone would save the government $300 million, according to Sen. Kent Conrad, D-North Dakota and chairman of the Senate Budget Committee.

A proposal to tax health care benefits could generate as much as $418 billion, the bulk of the money needed to pay for health care reform without increasing the federal government’s deficit.

—Jeremy Smerd

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