Report: Preliminary Finance Bill Hurts Low-Income Workers

As leaders of the Senate Finance Committee continue to haggle in search of a bipartisan health reform compromise, liberals are quickly taking issue with a preliminary proposal being floated this week — and not just over the absence of a public option.

One provision, for example, would require employers who don’t offer health insurance to pay the cost to subsidize those employees who earn less than 300 percent of poverty, therefore qualifying for federal help. But employers would have no such obligation to help cover higher-income workers, who wouldn’t receive any federal subsidies. The provision would have the unintended consequence of discouraging some businesses from hiring lower-income folks, the Center on Budget and Policy Priorities warned in a short analysis released this afternoon.

The proposal would make it considerably more expensive for employers to hire workers from lower-income families than workers from higher-income backgrounds to do the same job.  As a result, it would distort hiring decisions.  Employers would have strong incentives to tilt hiring toward people who have a spouse with a good income (or have health coverage through a family member), teenagers whose parents make a decent living, and people without children (since the eligibility limit for the subsidies in the new health insurance exchanges will increase with family size).  Low-income women with children in one-earner families would be particularly disadvantaged.

Meanwhile, conservatives are attacking the provision of the Finance proposal that would raise funds by taxing health insurers who offer high-cost plans. Then again, no one ever thought health reform would be easy.