Health and the Economy

Health Care And The Economy: The "Play-Or-Pay" Mandate

Isaiah J. Poole — Tue, 16 Jun 2009 13:34:28 -0700

In a conference call with reporters, a team of health care experts discuss two new reports that together explain how an employer health mandate can be shaped so that it does not have the adverse impact on employment predicted by crirics of health care reform.

The report by Philip Cryan published by the Institute for America’s Future and the Economic Policy Institute shows that an employer contribution to health care would most likely lead to job gains. Even under a worst-case scenario, Cryan explains that any negative impact of a requirement that employers either provide health insurance ("play") or pay into a public plan would be minimal, and would be outweighed by the benefits of more broadly available health coverage and lower health care costs.

Health care experts Jacob Hacker and Ken Jacobs discuss their report on how to structure a “play-or-pay” requirement on employers, drawing heavily from what they deem is a successful implementation of a play-or-pay requirement in San Francisco. Their study was done for the U.C. Berkeley School of Law Center on Health, Economic and Family Security and Berkeley Center for Labor Research and Education.

Opening the call is economist Jonathan Gruber, who discusses a petition signed by 330 economists and health experts calling on President Obama and Congress to act now and act "boldly" on health care reforms.

Business Mandate Good For Business

Bill Scher — Tue, 16 Jun 2009 10:25:30 -0700

As the health care debate heats up, it becomes clearer why most politicians flinch from tackling major reforms, and why it's so difficult to engage grassroots citizens to influence policy debates. The clear philosophical debate -- should our government provide a public insurance option? -- quickly splinters into a series of sub-debates. Is it fair to fund reform with limiting the tax exemption for employer benefits? Is malpractice reform a reasonable concession to the right-leaning American Medical Association? Should Congressional Budget Office estimates dictate our understanding of the possible budgetary impact?

Such skirmishes are invariably complicated to understand, and don't spark the same kind of grassroots engagement that clear philosophical debates do. And without grassroots engagement, major reforms typically weaken under corporate lobby pressure.

The best way to mitigate these obstacles is, when possible, to anticipate them, get ahead of the curve, disseminate critical info that can resolve disputes before misinformation sparks a brush fire.

One potential brush fire that has yet to catch is: should all businesses, including small businesses, be required to either provide quality health coverage or contribute to support a public plan option?

AUDIO
News Conference

Hear health care experts discuss an employer "play-or-pay" proposal and a reform statement endorsed by more than 300 leaders, including top economists.

Small businesses -- and more importantly, healthy mid-size businesses that regularly wrap themselves in the "small" business flag to better combat reasonable regulations -- will surely insist they can't handle a requirement to help provide health coverage without cutting jobs or going under. And conservative obstructionists will be right there to fuel their claims, no matter what the facts are.

But a new report released today show that a requirement for all businesses to help provide coverage will not lead to significant job losses, and more likely will create jobs.

The new Institute for America's Future/Economic Policy Institute report by Phillip Cryan found that only under an implausible worst-case scenario, including a steep burden on small businesses, would any job loss occur from requiring businesses to help cover employees. And even then, the losses would affect a mere 0.1% of workers.

More likely, once all impacts of health care reform are factored in -- new demand from health care services, increased productivity from better health, more efficient labor markets from health security, cost savings for businesses that choose contributing to the public plan, reduced health insurance costs throughout the system -- we'll enjoy a net increase in jobs.

Lessening the burden on vulnerable small business is still appropriate, but a broad exemption -- making it harder for our government to cover everyone -- is not necessary to protect jobs. A separate UC-Berkeley Labor Center report released today by Prof. Jacob Hacker and Ken Jacobs argues for a sliding scale based on payroll size -- "a better measure of a firm’s capacity than number of employees" -- to determine fair contributions to the public plan: "employers would pay 1 percent on the first $250,000 of payroll, 4 percent on the next increment, and so on."

Getting the word out to politicians, reporters, bloggers, activists and local small businesses that we need not fear job losses from an employer mandate could blunt an expected from conservatives to stoke panic -- as well as give the Obama administration cover so it won't be compelled to capitulate to the business lobby. (The President told the AMA, "small businesses that can't afford it should receive an exemption," but he hasn't defined what he considers to be "small" and what that exemption would be.)

Fortunately, with these new reports, we have the facts needed to make the case.

How to Structure a "Play-or-Pay" Requirement on Employers

Terrance Heath — Mon, 15 Jun 2009 22:16:40 -0700

President Obama has made health care reform a top priority, and Congress expects to pass a bill this year. All of the proposals under serious consideration are "hybrid" approaches, designed to build on the current system of job-based coverage while providing health insurance to all Americans, including those who are not offered it through their place of work. These proposals are often termed "shared responsibility" approaches, because they envision joint contributions by the public sector, individuals and employers. Individuals pay for coverage on a sliding scale based on income with public subsidies for low- and middle- income families. But employers also continue to be responsible for crucial aspects of financing and managing coverage.

In the hybrid health reform proposals under consideration in Congress—as in California in recent years—employer responsibility generally takes the form of “play-or-pay.” Firms that do not directly provide health care to their employees (or “play”) are required to “pay” into a public pool. Play-or-pay is distinct from what we call “play-or-penalty,” in which firms that do not directly provide health care are fined for their noncompliance but those fines do not directly fund their workers’ coverage. In play-or-pay proposals, employer contributions are not penalties for failure to provide insurance, but a financing source for the insurance coverage of their workers, whose enrollment in the public pool flows directly from the employers’ decision to contribute.

Even within the broad play-or-pay approach, however, many key design choices remain. How Congress resolves these choices will not only shape the constraints and opportunities that employers face; it also has important implications for other strategic aspects of health care reform: how people will be enrolled, how subsidies will be administered, how many people will continue to have employer-sponsored coverage, and so on. And, of course, employer requirements raise important political issues as well. Yet how employer requirements should be structured has received relatively little attention in the current debate, and the experience of states like California that have considered such requirements have been only superficially discussed.

This policy brief examines the policy design, economic effects, and political ramifications of employer requirements. We focus in particular on what Congress can learn from the California experience, as well as from an independent cost and coverage analysis of the “Health Care for America” proposal—a national play-or-pay plan closely resembling current legislative initiatives that was developed by one of us (Hacker) with the support of the Economic Policy Institute. We begin in Part I by reviewing the key reasons for having a play-or-pay requirement. In Part II, we provide a set of recommendations, drawn from the California experience and the “Health Care for America” plan, for navigating the design and political issues raised by national play-or-pay bills. Finally, Part III examines the economic effects of an employer requirement. We conclude that the potential negative effects are modest, are outweighed by potential benefits, and could be easily addressed in the design of the requirement itself.

Will a "Play or Pay" Policy For Health Care Cause Job Losses?

Terrance Heath — Mon, 15 Jun 2009 21:44:02 -0700

This report estimates the effects on employment of adopting a “play‐or‐pay” employer contribution policy for health care. Its main finding is the following: concerns about significant job losses resulting from such a policy are unfounded. Most likely there will be significant job gains. At the very worst, job losses would represent a few hundredths of one percent of employed workers.

A play‐or‐pay employer contribution policy would require employers who don’t provide their workers comprehensive health insurance to pay a new payroll tax to help fund public provision of health insurance for those workers. Many of the health care reform proposals currently under discussion in Congress incorporate such a contribution – as did the campaign proposal put forward by President Barack Obama.

In response to such proposals, both today and in past rounds of debate over health care reform, some scholars and policymakers have raised the concern that a play‐or‐pay employer contribution might lead employers to lay off workers. Especially given the extent of job losses throughout the U.S. economy in the current recession, this concern warrants serious attention. Would an employer contribution policy for health care lead to job losses? Approximately how many? This report seeks to answer those questions.