As expected, on July 11, the House of Representatives approved by a vote of 244-185 the Repeal of Obamacare Act (H.R. 6079), legislation introduced by House Majority Leader Eric Cantor (R-VA) in response to the recent Supreme Court decision upholding the constitutionality of the Affordable Care Act. Five Democrats jointed the Republicans to pass the bill, which would rescind the healthcare provisions in the Patient Protection and Affordable Care Act and the accompanying Health Care and Education Reconciliation Act of 2010 (ACA). Wednesday’s House vote was largely symbolic, as it is unlikely to be considered or approved by the Democratically-controlled Senate, and would face a certain presidential veto if it were to advance that far. In January 2011 the House passed a similar bill that would repeal the ACA in its entirety. That bill (H.R. 2) was never considered by the Senate, although an unsuccessful attempt was made in February 2011 to include its text as an amendment to a Federal Aviation Administration reauthorization bill. The Repeal of Obamacare Act is also not expected to advance in this Congress.

House Hearing Raises Employer Issues with Health Reform

The vote on the repeal bill followed a hearing conducted by the House Committee on Oversight and Government Reform on Tuesday that focused on how the law will impact businesses. Chairman Darrell Issa (R-CA) kicked off the hearing with the claim that the ACA “will discourage the 63,000 businesses with between 40 and 49 workers from expanding” and “will encourage all businesses to replace full-time labor with part-time labor.”

Under the shared responsibility provision of the law, employers with 50 or more full-time employees must provide their full-time employees with minimal essential health coverage by 2014 or pay a $2,000 per full-time-employee penalty, after the first 30 such employees. John Goodman, president of the National Center for Policy Analysis (NCPA), explained the consequences of this policy in his testimony:

Firms that employ fewer than 51 full-time workers will be exempt from penalties for failing to offer health coverage. The fifty-first worker, however, could be a very expensive hire. For firms that employ 51 workers or more, failure to provide insurance will subject them to a tax penalty of $2,000 for each uninsured employee beyond the first 30 employees. Growing from 50 to 51 uninsured workers would subject employers to a fine of $42,000 [(51-30) x $2,000] for adding the last worker. This fine, however, will be much smaller than the cost of providing 51 employees with the insurance mandated under the Affordable Care Act. The fine is much smaller if a firm hires a significant number of part-time workers (those working less than 30 hours per week). In the example above, if 20 of the firm's 51 workers were replaced by part-time workers, the firm's penalty would fall from $42,000 to only $2,000.10.

According to Goodman, this will cause employers to restructure their workplace “in inefficient ways:”

Below-average wage workers will want to work for a company that pays higher wages rather than offering a health insurance benefit. Above-average wage workers will have the opposite preference. In competition for labor, therefore, companies and entire industries will reorganize. Low-income workers will congregate in companies that do not provide insurance; high-income employees will work for firms that do provide it. Firms that ignore these worker preferences will not survive.

Speaking on behalf of the U.S. Chamber of Commerce, Mary Miller, President and CEO of JANCOA Janitorial Services, Inc., similarly took issue with the Affordable Care Act’s requirement that large employers provide their full-time workers with health insurance that offers minimal value and is affordable. Currently, her business provides limited benefits coverage, often referred to as a “mini-med” plan. According to Miller, these plans are not ideal, but they provide “some coverage at a reasonable price.” She claimed that less than 6% of her workforce takes advantage of this plan, and instead choses higher take-home pay. By requiring her company to either offer more comprehensive but costly coverage to all of her full-time employees or pay a penalty, the Affordable Care Act “creates perverse incentives,” she testified. In essence, this mandate will “penalize employers for hiring full-time employees.” She claimed that “the health reform law will force many employers to stop offering the coverage that they currently offer and encourage employers to consider restructuring their businesses and moving their employees to part–time status in order to remain in business.”

Jamie Richardson, Vice President of White Castle Systems, Inc., called for more guidance on how full-time employees will be defined under the law, and how hours of service will be calculated in order to determine who constitutes a full-time employee. Speaking on behalf of the National Restaurant Association, Richardson noted that this information is critical for the restaurant industry in particular, as its employees often work flexible and variable hours.

Ranking member Elijah Cummings (D-MD), on the other hand, called the health care repeal vote a “monumental waste of time,” and considered the hearing a “needless exercise.” Echoing this sentiment was Massachusetts State Senator and Founder and CEO of Cape Air, Daniel Wolf. Wolf claimed his presence at the hearing was intended to “debunk myths, and dispel fear and misunderstanding about the 2006 health care reform act that Massachusetts enacted with strong bipartisan support.” The Massachusetts law served as the template for the Affordable Care Act. Wolf claimed that when Massachusetts’ health care reform took effect, there were “dire predictions of the impact on businesses” that did not come to fruition. According to Wolf, health care reform in his state has “not stifled business,” and health care costs have not spiraled as a result.

A full list of panelists and links to their testimony as well as an archived webcast of the session can be found here.

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