The Democratic Healthcare Penalty on Lower-Income Employees

Here at Anchor Rising, we slog through the dreck, so you don't have to! The paragraph below is some less-than-transparent text from the House reconciliation bill on healthcare "reform" (i.e. the dreck)…

[SEC. 1003(b)] APPLICABLE PAYMENT AMOUNT -- Section 4980H of such Code, as so added and amended, is amended-- (1) in the flush text following subsection (c)(1)(B), by striking ‘‘400 percent of the applicable payment amount’’ and inserting ‘‘an amount equal to 1⁄12 of $3,000’’;

(2) in subsection (d)(1), by striking ‘‘$750’and inserting ‘‘$2,000’’…

To unravel the meaning of such epic prose, we'll start from the beginning. The title of "Applicable Payment Amount" suggests questions of 1) applicable to whom and 2) payment for what. For answers, we have go to the details of section 4980H(c) of the original bill (which starts on page 350). The title of 4980H(c) right away gives us the whom…

LARGE EMPLOYERS OFFERING COVERAGE WITH EMPLOYEES WHO QUALIFY FOR PREMIUM TAX CREDITS OR COST-SHARING REDUCTIONS.

The section specifically addresses employers offering coverage, not the ones who don't. No ambiguity there.

Moving down to subsection (c)(1)(B), we find a set of circumstances that trigger a tax-penalty…

‘‘(B) [If] 1 or more full-time employees of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee, then there is hereby imposed on the employer an assessable payment equal to the product of the number of full-time employees of the applicable large employer described in subparagraph (B) for such month and an amount equal to 1⁄12 of $3,000.

Read that section carefully citizens of America; what it says is that when an employer who offers health coverage to his or her employees hires someone who qualifies for a Federal subsidy, that employer will be charged a penalty. The amount of the penalty, according to the reconciliation bill, is $3,000 per year. That money doesn't do anything to directly to help cover the employee, it is a tax that goes directly to the government.

In other words, it now costs a "large employer" $3,000 more a year in Federal taxes to hire someone who qualifies for a Federal subsidy than to hire someone who doesn't. This is, of course, what Democrats call rational economic policy.

If nothing else, this makes it understandable as to why House Democrats don't want to have their votes recorded on the substance of the Senate healthcare legislation. But as the fixes in the reconciliation legislation make clear, this is a provision House Democrats want to keep, not one they want to get rid of!