From Ezra Klein

The Baucus Bill: The Worst Policy in the Bill, and Possibly in the World

Baucus’s bill retains the noxious “free rider” provision on employers. Rather than a simple employer mandate that forces every employer over a certain size to provide health-care insurance or pay a small fee, the free rider approach penalizes employers for hiring low-income workers who are eligible for subsidies. That will create an incentive to do one of two things: Don’t hire low-income workers (hire a teenager looking for a job rather than a single mother, or hire a housewife looking for a second job rather than an unemployed breadwinner), or hire illegal immigrants.

And it actually gets worse. The employer pays more if the low-income worker needs subsidies for his family as opposed to just himself. So it not only discriminates against low-income workers, but it particularly discriminates against low-income parents. Single mothers will get the worst deal, as they have lower incomes, and as you might expect, children who need health care.

Baucus Corp has 100 employees and does not offer health-care coverage. Thirty of the employees receive subsidies on the exchange. The average subsidy that year is $5,000. Baucus Corp woulds pay $400 times 100 employees, as $40,000 is less than $150,000 ($5,000 times 30 employees). Each of those low-income employees is costing Baucus Corp $1,333 more than an employee who didn’t need subsidies.

Now imagine that Baucus Corp. only has five employees who need subsidies, and the average subsidy that year is $5,000. In that scenario, Baucus Corp would pay $25,000 rather than $40,000, because $25,000 is less than $40,000. Each low-income worker now costs Baucus Corp. $5,000 more than a worker who doesn’t need subsidies.

So in the scenario where Baucus Corp. has a lot of low-income workers, they cost a huge amount overall because they’re multiplied against the total number of workers. In the scenario where Baucus Corp. has a few low-income workers, they cost a huge amount individually because they’re multiplied against the average subsidy cost. No matter how you look at it, the policy makes it profitable for employers to discriminate against hiring low-income workers. It is not only the worst policy idea in the bill, but one of the worst policy ideas I’ve ever seen.

WASTED MONTHS on this foolishness.

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