WASHINGTON – Laws that require employers to provide health insurance to employees are likely to reduce employment for low-wage workers, according to a recent study.
Small businesses will increasingly be faced with tough decisions when faced with state laws that require them to provide health insurance, said the researchers, from the Employment Policies Institute.
At least a dozen states – including California, Maine, Illinois and Minnesota – are considering so called “play or pay” mandates to provide all employees with healthcare insurance. In addition, three Democratic presidential candidates – Hillary Clinton, Barack Obama and John Edwards – have included some variation of play or pay initiatives in their healthcare reform platforms.
With these initiatives, employers either play – provide healthcare insurance coverage to employees – or pay subsidies, typically a flat per-hour rate, to support governmental programs that provide insurance for those who don’t have it.
The study estimates that for every 100 newly insured employees given insurance because of pay-or-pay mandates, 10 entry-level employees will lose their jobs, based on federal data from the Current Population Survey, a joint effort for data collection for the Bureau of Labor Statistics and the Census Bureau.
“Play or pay mandates…are a blunt instrument for funding health insurance for the working poor,” write Cornell University economists Richard Burkhauser and Kosali Simon, authors of the study. “The vast majority of those who benefit from play-or-pay mandates…live in families with incomes twice the poverty line or more.”
Such initiatives are ineffective in broadening healthcare coverage across the population, the authors contend.
“Depending on how coverage is determined, the mandate will leave a significant share of the working poor ineligible for such benefits, either because their hourly wage is too high or they work for smaller exempt firms,” the authors wrote.
Mandating health insurance coverage is of growing importance because the Census Bureau has found that the percentage of the workforce with employer-based coverage has declined to 59.7 percent in 2006.
Play-or-pay mandates “force employers to provide compensation above the competitive market price for low-skilled workers least able to compete in the market that the program was intended to help,” the authors said. They suggested the use of a health tax insurance tax credit might be studied as a more effective way of subsidizing health insurance for the working poor.
“The cost of providing health insurance is so great that most businesses covered by play-or-pay laws will be forced to cut back on hours and jobs just to stay afloat,” said Jill Jenkins, chief economist for the Employment Policies Institute. “As healthcare costs continue to rise, insurance mandates on employers will result in increasingly substantial job loss, with the most vulnerable members of the workforce getting hurt the most.”