The Wonk Room

Republicans: Requirement To Have Health Insurance Is ‘A New Tax’ On Families And Businesses

Rested and invigorated from their Fourth of July recess, Senate Republicans unleashed a new line of attack against the CBO’s score of Sen. Ted Kennedy’s (D-MA) health care bill. After initially claiming that the preliminary CBO estimate of the bill was too high, today during markup, Sens. Mike Enzi (R-WY) and Orrin Hatch (R-UT) argued that the new score — which for the first time included an employer mandate and brought the cost of the bill to around $600 billion — included a tax on hard-working American families and businesses.

Enzi and Hatch argued that the penalty levied on employers who fail to obtain coverage for their workers and individuals was “a new tax” that undermined “President Obama’s own commitment to not raise taxes on 95% of Americans.”

Watch a compilation:

But to characterize the employer and individual mandates as new taxes is highly disingenuous. Health reform builds on the principle of “shared responsibility,” an approach that envisions “joint contributions by the public sector, individuals and employers.” While individuals are responsible for purchasing health insurance coverage — with a waiver for those who cannot afford to do so — “firms that do not directly provide health care to their employees” would be required to pay into a public pool to help finance their employees’ coverage.

Both policies are part of a larger strategy designed to lower health care costs. The bill exempts small businesses from the mandate, offers a tax credit to help them afford coverage, subsidizes insurance for middle class Americans, and allows the lowest income Americans to enroll in the Medicaid program. All this is designed to slow the growth of health care premiums. After all, only if you have everyone in the system, can you really invest in preventive care, reduce expensive chronic disease treatments, and eliminate the cost shift from the uninsured.

Moreover, as UC Berkeley Labor Center chair Ken Jacobs and Berkeley professor Jacob Hacker explain, an employer mandate enhances the existing system of employer-based coverage, levels the playing field between employers “that provide insurance and those competing with them that do not,” reduces “crowd-out of private coverage by new public programs,” and preserves the employer contribution — an important source of funding for health care reform. And while Republicans charge that an employer mandate to provide coverage would lead to fewer jobs or mass layoffs, especially for low-wage workers, Hacker contends that “these concerns are overstated when it comes to the play-or-pay proposals currently under consideration, with their relatively modest employer requirements.”

A study of the impact of the Hawaii health care mandate, for instance, “found no evidence of reduced employment.” In Massachusetts, where employers with more than 10 employees are required to provide coverage or pay a fine, “few firms reported making changes as a result of health reform.” Moreover, “it is also important to keep in mind that health reforms with employer requirements promise new benefits for firms and workers as well as new costs,” Hacker explained in testimony to the House Education and Labor Committee. “All firms would benefit from the reduction in unpaid medical bills incurred by the uninsured. Firms would further benefit from any savings due to a reduced rate of health-care cost growth,” Hacker said.

On the whole, the consequences of failing to reform health care reform far outweigh any penalty levied on the individual or the employer. As economist Uwe Reindhardt points out, the “cost” of the health care reform bill is a small fraction of the $40 trillion we’re projected to spend on health care in the next ten years. Should we fail to reform the health care system, the cost of health insurance for a family of four “will stand at $18,000 by 2010″ or $36,000 per typical nonelderly family of four by 2020. “Millions upon millions of middle-class families will see themselves pushed into the ranks of the uninsured — and possibly into bankruptcy — unless someone helps them financially.” Currently, too many Republicans are simply standing in the way.

Transcript:

ENZI: We also need to acknowledge why the estimates of the bill are lower than the first numbers we saw. The first reason is because the bill contains a new tax on employers who do not offer health insurance to their employees. This new tax will drive down wages and cause employers to reduce the number of their employees.

HATCH: Job killing employer mandate, that is going to tax American businesses by almost 52 billion dollars?

ENZI: Most economists agree that the effect of this economic growth killing tax will fall disproportionatly on low income and minority populations.

HATCH: Now this is at a time that American families are struggling to pay their bills and keep their homes.

ENZI: With the unemployment rate now close to 10% we should be finding ways to create new jobs for Americans rather than imposing new taxes that will cut their pay and cost them their jobs.

HATCH: This is going to lead to lower wages and more job loss at a time where our national unemployment rate is at almost 10% and rising.

ENZI: The bill also reduces its cost estimate by violating one of President Obama’s campaign pledges from last year. President Obama promised that he would not increase taxes on families who made less than $250,000.

HATCH: This onerous mandate flies in the face, as the distinguished ranking member said, of President Obama’s own commitment to not raise taxes on 95% of Americans.

ENZI: But that is what this bill does. It taxes Americans who do not have health insurance. Most of those families make less than $250,000 a year. But according to the CBO under this bill they’ll have to pay 36 billion in new tax penalties over the next ten years.

HATCH: 36 billion dollars in additional tax revenue?

ENZI: There should be no doubt the American people should understand, and the Administration should understand, that this bill breaks that campaign pledge on taxes.