Collins Amendment (#3638) to Waive Employer Mandate
Below please find my colleague Jon Lieber’s analysis of the Collins amendment (#3638) to waive the employer mandate tax for the hiring of previously unemployed individuals…
Summary
The health care bill requires that all employers with at least 50 full-time employees offer their employees the “opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan.”
Minimum essential coverage generally means coverage that covers at least 60 percent of the actuarial value of a full-coverage plan.
If an employer fails to offer such coverage, and at least one full-time employee receives a premium tax credit through the exchanges created by the bill, a tax is levied on the employer equal to $2,000 multiplied by the total number of employees employed by the employer (the first 30 employees are exempt from that count).
This is known as a “free rider” penalty, since it is designed to punish employers who do not offer government-approved coverage, if their employees receive a tax credit in the exchange.
This tax raises $52 billion over the next ten years.
The Collins amendment waives the employer mandate tax for any new employee hired who was previously unemployed, by not including these employees in the count of “full time employees” for purposes of calculating employer mandate compliance.
The definition of a qualifying employee for purposes of this amendment is the same as that used in the Hatch/Schumer payroll tax credit previously considered by the Senate and included in the HIRE Act – it is an employee who signs an affidavit that he or she has not been employed for more than 40 hours during the 60-day period prior to the date of new employment.
Considerations
The unemployment rate is 9.7 percent and 15 million Americans are out of work; 1 in 4 of these out-of-work Americans has been out of work for 27-weeks or more.
The employer mandate tax punishes businesses who hire additional workers – a business with 49 workers that does not offer government-approved insurance and hires an additional worker suddenly would have to pay a $40,000 fine to the government, if even one of these employees receives a subsidy in the exchange.
CBO has said that the costs of the employer mandate will be passed to workers, who will see lower wages, fewer full-time jobs, and more outsourcing.
Although the employer mandate won’t come into existence until 2014, incentives to keep companies small such as this one will be felt today as employers plan for the future and see this looming tax increase.
This amendment would provide an incentive to favor the hiring of unemployed workers – this could help lower the unemployment rate, but also create an artificial preference for hiring unemployed workers instead of workers who are unemployed.
It is unclear how long a newly hired unemployed worker would be exempt from the mandate tax under this amendment.