Heritage Foundation Leadership for America

A Costly Employer Mandate

• It's a Regressive Tax:The House and Senate draft proposals for health care reform include employer mandates that require employers to pay higher taxes (as much as an 8% payroll tax) if they do not offer health insurance or if they offer it but some employees decline it and use the government system. The result of such a tax penalty will cause lower pay and job losses, especially for low-income workers.
• By the Numbers: According to The Heritage Foundation, the mandates could cost businesses up to $49 billion a year, 10.2 million workers will be at risk of slower wage growth and cuts in other benefits, and as many as 9 million low-wage and part-time workers will lose their employer-based health insurance.
• Mandates Kill Jobs and Lower Wages: The result of such a tax penalty is lost jobs and lower wages, especially among low-income workers. Businesses are forced to make up lost revenue or pass these costs onto consumers. Either way, the cost is covered by the American worker.

Increasing the Cost of Private Health Insurance

• The "Public Option": Employers and their employees will likely bear the costs of any new "public plan" through an increase in private insurance premiums. Historically, government health plans reimburse providers below cost. These below-cost payments are in part offset by private payers, creating a massive cost shift.
• Major Cost Shifts: A study by the actuarial firm Milliman calculated that public programs, such as Medicare and Medicaid, currently shift $88.8 billion in costs onto private payers per year, increasing the typical American family's annual private health insurance premium by $1,512. Can you imagine the cost shift if 103.4 million more Americans were on a government plan?
• More Regulation: New health insurance regulations will cause insurance to be more expensive for employers and require costs for employers to comply with the new regulations. The bills pending in the House and Senate include provisions that would result in sweeping, complex, and highly discretionary new federal regulation of health insurance.
• The Health Commissioner: Under the House bill, a new health commissioner would have the authority to conduct audits and assess penalties on both commercial insurers and employer-sponsors of plans that fail to comply with the new federal requirements. So any employer offering health insurance can expect to be harassed and even fined by federal bureaucrats seeking to determine if it is in compliance with federal rules micromanaging the operations of its plan.

Creating a Poor Environment for Economic Growth

• A "Surtax" on Small Businesses: The House proposal institutes a "surtax" on top of ordinary taxes to help pay the bill. Joint-filing taxpayers or small businesses making over $350,000 (or $280,000 individually) will be forced to pony up an additional 1% of their income or profits, and those making more would be taxed up to 5.4%. Coupled with the expiring Bush tax cuts, these plans would raise the top marginal tax rate in the U.S. higher than most European countries, including France, Germany, and Spain.
• High Taxes: In a global race for capital, income tax rates that are higher than all but a few of the highest-tax countries will be a further hindrance to the ability of the U.S. to attract new investment, entrepreneurs, and businesses. In addition to damaging our international competitiveness, the surtax would surely worsen the recession. Not a single economic school of thought advocates raising taxes during a recession or threatening to do so in its aftermath. To call for tax increases during the largest recession in 70 years is downright reckless.

For more information, please visit: http://FixHealthCarePolicy.com