NPR logo Senate Health Care Approach Could Harm Poorest Workers

Senate Health Care Approach Could Harm Poorest Workers

Unemployed, low income workers seeking jobs could find the already difficult odds against them stacked higher if the health-care overhaul framework by the Senate's "gang of six" which President Barack Obama appears to be leaning towards, retains a critical feature.

The senators led by Senate Finance Committee Chair Sen. Max Baucus (D-Mont.) want smaller employers (50 workers or less) who don't provide their workers with health-care insurance to pay the total cost of federal subsidies their low-income workers would receive. Those subsidies would be meant to help those workers purchase coverage from the health-insurance exchanges policymakers envision creating.

But because many senators want to limit the burden on small employers, the "gang's" current proposal would exempt employers from making the subsidy payments for workers from households with income more than three times the poverty line.

According to an analysis by the Center on Budget and Policy Priorities, this idea could result in discrimination in hiring against low-income workers since a small employer might not want to incur the added cost of hiring poorer workers versus other applicants.

An excerpt:

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.

While language could be included to try to ban such discriminatory effects, it would be virtually impossible to enforce effectively. It would be extremely difficult to prove in court that an employer has passed over one applicant and hired another because of the health surcharge that employers would face if they hired people receiving health insurance subsidies. Moreover, most low-income job applicants who do not get hired could not afford to hire attorneys to initiate legal proceedings. For the tiny number that might be able to institute proceedings, the legal complaint likely would take months and, more likely, years to adjudicate. In short, the fact that low-income workers would cost an employer up to several thousand dollars more to perform the same job could not easily be overcome.

This differential treatment of workers based on their family income also would likely influence employer decisions about which of their employees to let go when they trim their workforces to cut costs, such as during a recession. Workers from low-income families would cost the firm significantly more to retain than other workers who are paid the same wage to do the same job.

Although this clearly is not intended, the proposal likely would have discriminatory racial effects on hiring and firing. As noted, it would discourage the hiring of lower-income people. And since minorities are more likely to have low family incomes than non-minorities, a larger share of prospective minority workers would likely be harmed.

This potential problem is a clear example of what makes overhauling a system as complicated as American health care so numbingly difficult.

By reaching for a laudable goal — the insuring of workers whose employers don't provide health care coverage — the "gang of six's" proposal could actually have the unintended consequence of preventing some of those workers from being hired.

It would take King Solomon to figure this one out.