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Analysis Reveals Health Care Reform’s Potential Harm to Low-Wage Workers

The bills would foist increased costs onto as many as 1.4 million employers, depending on the specifics of each draft of health reform legislation, and those costs would be passed along to workers and customers, the report’s author says.

September 16, 2011
Related Topics: Medical Benefits Law, Benefit Design and Communication, Latest News
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The health care reform bills in Congress will likely cost 382,000 workers their jobs and put 5.2 million mostly low-wage workers at risk of being unemployed, according to an analysis published this week by the conservative Heritage Foundation in Washington.

The author of the analysis, Mark Wilson, said he wanted to show the unintended economic consequences of the legislation proposed in the House and Senate.

The bills that have been introduced would require employers to provide health care for their employees or pay a fee to the government to subsidize the cost of covering the uninsured.

“If you impose an employer mandate there will be a negative impact on workers,” said Wilson, a principal of economic and public policy research group Applied Economic Strategies, which the foundation commissioned to do the study. “There are some good things, but [also] nasty unintended consequences, especially for part-time, low-wage workers.”

The bills would foist increased costs onto as many as 1.4 million employers, depending on the specifics of each draft of health care reform legislation, Wilson said. Those costs would be passed along to workers and customers, he said.

When faced with a government-mandated benefit such as Social Security, Medicare or workers’ compensation, employers must trim costs elsewhere—be it their workforce, hours worked, wages or other benefits, Wilson said.

“All the economic research out there suggests that’s what will happen,” he said.

Wilson cites San Francisco restaurant owners as an example of businesses passing costs related to mandated health care reform on to customers. A line item is included in a diner’s bill detailing the portion of a meal’s cost that goes toward complying with the city’s law that requires employers to provide workers with health insurance or pay a fee.

“What I’m trying to do is reveal to policymakers some of the unintended consequences of health reform,” Wilson said, “so when they vote on this issue they will be fully informed.”

The Congressional Budget Office, which has analyzed the economic impact of the bills, says health care reform legislation in the House will cause 9 million mostly low-wage and part-time workers to lose their employment-based health insurance. Overall, however, the number of workers with employment-based health care will increase by 3 million.

Jon Gabel, a senior fellow at the National Opinion Research Center in Washington, points out that while some may lose their jobs, employment in other industries, such as health care, may increase. He adds the harm to low-wage workers can also be minimized by tax credits or subsidies to help offset the cost to employers of providing health benefits.

Gabel said the assertion that an employer mandate would cost workers their jobs might not materialize.

“They raised the minimum wage in New Jersey and they thought firms would leave,” he said. “What happened was there was lower turnover. The lower turnover offset the costs of increasing the minimum wage.”

Wilson said his analysis did not look at how providing health care could help employers reduce turnover and how people with health insurance might achieve improved health and productivity.

—Jeremy Smerd

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