House Committee Holds Hearing on Health Care Law's Impact on the Economy, Employers and the Workforce

U.S. Capitol Building.jpgOn Wednesday, the full House Committee on Education and the Workforce heard contrasting testimony on how the new health care law affects employers and the economy. This meeting follows other recent House and Senate committee hearings that have addressed how the Affordable Care Act impacts the workforce. In his opening statement, Committee Chairman John Kline (R- MN) claimed that “up to 69 percent of all business health plans and 80 percent of small business health plans will soon see significant changes to the benefits they provide,” adding, “We need to understand what those changes are and how insurers, employers, and individuals are responding.”

While acknowledging need for health care reform, Paul Howard, Senior Fellow with the Manhattan Institute’s Center for Medical Progress, testified (pdf) that the Affordable Care Act” is not the solution to our health care woes. If anything, the Affordable Care Act doubles down on many of the worst aspects of our current system, while adding new cost pressures and problems that will serve as a drag on economic growth and job creation for years to come.” Specifically, Howard criticized the new insurance mandates, taxes, and employer penalties that he claimed “will have a direct and more immediate effect on the cost of health insurance coverage and employer decisions to hire (or not hire) additional employees.” Howard stated that the taxes on insurance, pharmaceutical, and medical device companies will likely be passed onto employers and employees in the form of higher premiums. He added that a majority of employer-sponsored health plans will lose their grandfathered status in the coming years and therefore be subject to the Act’s new regulatory requirements and costs. Howard concluded his testimony by stating that regulatory uncertainty under the Affordable Care Act will ultimately hinder job creation.

Speaking on behalf of the International Franchise Association, business owner Gail Johnson similarly found fault with the law, arguing (pdf) that it “is biased toward mandating coverage rather than providing meaningful cost control.” According to her testimony, small and midsized businesses “have limited margins for increased labor and operating costs. Complying with the requirements of the new law will force entrepreneurs to invest less into growing their business.” Johnson also noted that the Act’s mandate exemption for small businesses serves as a disincentive to hire additional employees. Moreover, the coverage mandates will result in the end of health coverage being considered a benefit of employment or part of a competitive compensation package.

Neil Trautwein, Vice President and Employee Benefits Policy Counsel for the National Retail Federation (NRF), took particular aim at the employer mandate contained in the law. He testified (pdf) that the pay-or-play mandate may “ultimately succeed in dismantling employer-based health coverage.” The NRF has created an online tool for employers to calculate the cost of the employer mandate.

Both Trautwein and Johnson criticized the penalty that will be imposed on employers should the cost of insurance exceed 9.5 percent of an employee’s family income, which both pointed out was largely beyond an employer’s knowledge or control.

Trautwein also took issue with the Act’s “free-choice” vouchers, in which certain low-income employees can opt out of the employer plan but use their employer’s contribution as a voucher to purchase health insurance on their own. According to Trautwein, this could increase employer costs if younger, healthier entry level employees chose to opt out.

If the Act is not repealed, Trautwein made the following alternative recommendations “to help expand employer flexibility and to help lower the cost of providing coverage”:

  • Repeal employer mandate penalties, including the penalties for providing “unaffordable” coverage and the “free-choice” vouchers.
  • Define a full-time employee as working 40 hours per week, determined on at least a 120-day basis.
  • Expand waiting periods to at least 120 days.
  • Repeal auto-enrollment or delay onset of auto-enrollment for at least 120 days, consistent with maximum waiting periods.

In contrast, economist Paul Van de Water, Senior Fellow at the Center on Budget and Policy Priorities, spoke in favor of the health care law. According to his testimony, (pdf) the Act “will significantly strengthen our nation’s economy over the long haul, although initially its effects will be modest. The law takes essential steps to slow the growth of health care costs, which are consuming an ever-increasing share of our economic output and have contributed significantly to the stagnation in workers’ real wages in recent years.” Citing a report by the Congressional Budget Office (CBO), Van de Water stated that “[e]ven if health reform were to impose some costs on employers, economic principles strongly suggest that the impact on business hiring decisions would be small. Any such effect would instead ultimately be passed on to workers in the form of slower growth in their after-tax compensation.”

A link to an archived webcast of the hearing can be found here.

This entry was written by Ilyse Schuman.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.