09/05/2009 05:12 am ET | Updated May 25, 2011

Finance Committee Health Care Bill: Bad For Poor People

The Senate Finance Committee's version of a health care bill hasn't been made public yet, but the Center for Budget and Policy Priorities (CBPP) has seen at least some of it, and it is highly problematic.

Like the three versions of the House bill and the Senate Health and Education Committee (HELP) version, the Finance Committee bill will include a charge on medium and large businesses that don't provide health insurance for their employees. In the House versions of the bill, employers with more than $250,000 in payroll -- $500,00 in the Energy and Commerce Committee version -- that don't provide insurance will have to pay a surtax equal to eight percent of their annual payroll. In the HELP bill, employers with more than 25 employees who don't provide insurance will have to pay annual fees of $750 per full-time employee and $375 per part-time employee.

According to an article on the CBPP website, here's how it will work in the Senate Finance Committee bill:

Under the proposal, employers who do not offer health coverage would have to pay the average subsidy cost per person for all employees who purchase coverage through the new health insurance exchange and qualify for a subsidy because their family income is below 300 percent of the poverty line. 1 But employers would not have to contribute to the health insurance costs of employees with higher family incomes. The new requirement would apply to firms with 50 or more employees.

The problem with this plan, as the CBPP sees it, is that it would create two classes of employees, leading to problems in employment for the same people that health care reform is supposed to help. Specifically, it would make it more expensive for businesses to hire poor people and, CBPP worries, lead to employment discrimination.

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.

As far as knowing which applicants have low family incomes, it would be easy enough to make an educated guess. Employers can make assumptions about family income based on things they observe about an applicant and information the applicant is required to include as part of their application. It's generally pretty easy for an employer to discern in the interview whether or not someone is a single parent. For example, a single parent may have to discuss shift availability at the interview so they know that the job would let them pick their child up after school. CBPP points out that employers will also know the applicants home address and race. "The combination of race and address for different applicants will correlate with different likelihoods of being low-income," they write.

If the CBPP is correct and this plan is included in the bill that eventually comes out of the Senate Finance Committee, it's going to have to be fixed. These are serious problems that run entirely counter to the large goals of health care reform. Luckily, the four other versions of the bill have different plans, so the chances are good that this will eventually be replaced with something better -- either in reconciliation with the Senate HELP bill, or in conference committee with the bill that psses the House.

Read more on Sunlight Foundation.