Will Health Reform Bill Create an Incentive to Discriminate?

"Creating an incentive to discriminate on the basis of economic status, as the “free rider” provision threatens to do, would leave an open wound on health reform legislation."

Salem-News.com

(SILVERTON, Ore.) - A provision in the health care reform legislation being developed by the U.S. Senate Finance Committee would give certain employers an incentive to discriminate against job applicants from lower-income families.

For employers who do not provide affordable health coverage for their employees, the bill's "free-rider" provision would impose a fee for each worker receiving a federal subsidy to help pay for health coverage. This approach would create a perverse incentive for employers to favor hiring workers from higher-income households -- a person with a spouse with a high-paying job, for instance -- who would not trigger the fee. A group of 14 Oregon advocacy, labor, business and faith organizations today urged Oregon Senators Ron Wyden and Jeff Merkley to work towards removing the "free-rider" provision from the final bill.

Honorable Ron Wyden
United States Senate
223 Dirksen Senate Office Building
Washington, DC 20510 Honorable Jeff Merkley
United States Senate
107 Russell Senate Office Building
Washington, DC 20510

Dear Senators:

We are a group of Oregon advocacy, labor, business and faith leaders concerned about the employer “free-rider” proposal included in the health reform proposal being developed by Senate Finance Committee Chairman Max Baucus. The provision is flawed, threatening to create an incentive for employers to discriminate in hiring decisions against individuals from low- or moderate-income families.

The “free-rider” provision would apply only to employers who do not provide affordable health coverage for their low- and moderate-income employees. The provision would require these employers to pay a fee for each worker receiving a federal subsidy to help them purchase insurance. The employer would pay nothing for employees ineligible for subsidies due to their family income.

As such, employers subject to the provision would find it more expensive to hire employees from lower income households than those from higher income ones.

Consequently, the provision would create an incentive for employers to favor higher income job candidates. Knowledge of a prospective employee’s household income information — whether the job seeker has a spouse with a well-paying job or whether he or she is a single parent, for example — could prove decisive, and thus discriminatory, in hiring decisions.

Precluding employers from getting a “free ride” on a reformed health care system is important, but Congress can do this without instituting an incentive that discriminates on the basis of the economic status of employees. A better approach would be to require employers who fail to offer coverage to pay a fee on their total payroll, rather than a fee tied to a particular employee.

Creating an incentive to discriminate on the basis of economic status, as the “free rider” provision threatens to do, would leave an open wound on health reform legislation. Therefore, we respectfully urge you to work with the Senate leadership to make sure that the final bill does not include this provision.

Oregon advocacy, labor, business and faith leaders:
Advocacy Coalition of Seniors and People with Disabilities
AFSCME Local 3214
Children First for Oregon
Ecumenical Ministries of Oregon
Health Care for All Oregon
Oregon Acorn
Oregon Action, Portland Chapter
Oregon Center for Public Policy
Oregon Health Action Campaign
Oregon Small Business Healthcare Initiative
Oregon State Council for Retired Citizens
Save Oregon Seniors
Sound Science Initiative
United Seniors of Oregon