September 4, 2009 | WebMemo on Health Care
On August 28, Igor Volsky, a health care researcher and blogger at the Center for American Progress, posted a story claiming The Heritage Foundation released a biased report on the effects of the employer play-or-pay mandates contained in the health care bills currently working their way through Congress. Sadly, it is Volsky who is misleading policymakers.
Myth: "The four health care bills before Congress require large employers to either provide coverage to their workers or pay a tax to finance the expansion of health care coverage."
Fact: Many small businesses are large enough to qualify under the bills.
Myth: "The Heritage analysis erroneously assumes that higher costs to business inevitably translate into job loss or lower take-home pay."
Fact: The Heritage Foundation report makes no such assumption.
Myth: "The Heritage analysis disregards all of the expected job and productivity gains from an employer mandate."
Advocates of the bill expect additional jobs in the health care sector, increased productivity and efficiency in the workforce, and a lower rate of growth of health care costs.
Fact: In many cases, the costs would outweigh the benefits.
Myth: Economic research debunks Heritage's conclusion.
"The established economic literature surrounding employers' response to increased costs and modest pay-or-play proposals completely contradicts the Heritage conclusion. For instance, virtually all economic research shows that minimum wage increases--which are similar to the new modest pay or play requirements--'have little or no impact on employment.'"
Fact: The established economic literature on mandated employee benefits finds the cost of health insurance mandates is shifted to employees.
Myth: "The Heritage analysis also relies on an outdated bill and disingenuously implies that the overwhelming majority of American businesses would face higher costs."
Fact: The bill cited in the Heritage report is one of three competing versions of the bill in the House.
Myth: The mandate is simply a safeguard to prevent big businesses from dropping coverage.
As Pat Gorafalo alleges, "this is essentially a mandate on large employers, to ensure that they can't simply drop their coverage" and send their employees into the health insurance exchange or the non-group market."
Fact: The bill actually makes it more likely that businesses will drop coverage.
Myth: Mandates will help businesses.
"With increased access to care, all firms would benefit from the reduction in unpaid medical bills incurred by the uninsured and the savings due to a reduced rate of health care cost growth and greater labor productivity."
Fact: This is wishful thinking.
Hurting Those Who Need Help
Volsky and the Center for American Progress may want policymakers to focus on the benefits of an employer mandate, but that does not mean there will not be costs and unintended consequences associated with it.
Policymakers need to know that the costs and benefits of an employer mandate will not be equally borne by firms and employees. Some firms will see their health care costs decline, and some will see their costs rise. For those whose costs rise, it will be the low-wage, unskilled workers who will bear the brunt of the burden.
D. Mark Wilson is a consultant for The Heritage Foundation and Principal of Applied Economic Strategies LLC.
See Igor Volsky, "Heritage To Release Biased Report On Effects Of Employer Mandate," The Wonk Room, August 28, 2009, available at: http://wonkroom.thinkprogress.org/2009/08/28/heritage-employer-mandate/ (September 2, 2009); and D. Mark Wilson, "Economics of Play-or-Pay Mandates in Health Care Reform Bills," Heritage Foundation Backgrounder No. 2312, August 28, 2009, at http://www.heritage.org/Research/HealthCare/bg2312.cfm.
The Senate HELP Committee bill is available at /static/reportimages/90086E43E1361BA163F3183D8CAE88E2.pdf (September 2, 2009).
There are three different versions of H.R.
3200: (1) the Ways and Means Committee bill, available at http://waysandmeans.house.gov/media/pdf/
111/AAHCA09001xml.pdf (September 2, 2009), (2) the
Actof2009/MILLCA_158.pdf (September 2, 2009), and (3) the "Blue-Dog compromise" available at http://energycommerce.house.gov/Press_111/
20090731/hr3200_ross_2.pdf (September 2, 2009).
Data prepared by the U.S. Census Bureau for Applied Economic Strategies, LLC.
Phillip Cryan, "Will a 'Play-or-Pay' Policy For Health Care Cause Job Losses?," Institute for America's Future and the Economic Policy Institute, June 2009; Katherine Baicker and Helen Levy, "Employer Health Insurance Mandates and the Risk of Unemployment," National Bureau of Economic Research, Working Paper No. 13528, October 2007; Craig Olsen, "Do Workers Accept Lower Wages in Exchange for Health Benefits?," Journal of Labor Economics, Vol. 20, No. 2 (2002); Norman Thruston, "Labor Market Effects of Hawaii's Mandatory Employer-Provided Insurance," Industrial and Labor Relations Review (October 1997); Price Fishback and Shawn Kantor, "Did Workers Gain from the Passage of Workers' Compensation Laws?," Quarterly Journal of Economics (August 1995); Jonathan Gruber, "The Incidence of Mandated Maternity Benefits," American Economic Review (June 1994); Jonathan Gruber and Alan Kruger, "The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance," Tax Policy and the Economy, Vol. 5 (1991); Lawrence H. Summers, "Some Simple Economics of Mandated Benefits," The American Economic Review, Vol. 79, No. 2 (May 1989).
It is important to note, however, that increased productivity usually comes at the cost of employees working fewer hours. For example, the second quarter of 2009 saw the largest productivity increase since the third quarter of 2003, largely because of a 7.6 percent in hours worked. See Bureau of Labor Statistics, "Productivity and Costs, Second Quarter 2009 Revised," September 2, 2009, at http://www.bls.gov/news.release/prod2.nr0.htm (September 2, 2009).
See footnote 6.
Richard V. Burkhauser and Kosali I. Simon, "Who
Gets What from Employer Pay or Play Mandates?," National Bureau of
Economic Research, Working Paper No. 13578, November 2007,
papers/w13578 (September 2, 2009); David Neumark and William Wascher, "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," National Bureau of Economic Research, Working Paper No. 125663, November 2006, at http://www.nber.org/papers/w12663 (September 2, 2009).
Bureau of Labor Statistics, "Employer Costs for Employee Compensation--March 2009," Table 1, June 10, 2009, at /static/reportimages/FFEDA7A94677AAE0E4B28EA009C6CE98.pdf (September 2, 2009).
Congressional Budget Office, "Additional Information Regarding the Effects of Specifications in the America's Affordable Health Choices Act Pertaining to Health Insurance Coverage," July 26, 2009, at /static/reportimages/0A815E7A1C8B80FE856715162A951B74.pdf (September 2, 2009).