NCPA - National Center for Policy Analysis


September 5, 2008

Sen. Barack Obama has released only sketchy details about his health reform plan.  The Commonwealth Fund has produced a very detailed plan, however, which it encourages readers to view as very similar to Obama\'s.  Thus, one can assume the Commonwealth plan details apply where Obama has been vague, says John C. Goodman, president of the National Center for Policy Analysis.

  • The Obama plan would impose a "pay-or-play" mandate on all employers -- taxing those who do not provide health insurance for their employees.
  • Following Commonwealth, one can assume this would be an additional tax of 7 percent on payrolls -- up to $1.25 per hour per employee -- imposed on employers who fail to pay at least 75 percent of their employees\' premiums for a minimum benefit package.
  • Were this provision enacted today, it would immediately affect the 40 percent of small employers who do not offer coverage, the 30 million people in families who have at least one worker but no health insurance, and millions of Medicaid enrollees who have some workforce connection -- to say nothing of all the employers who currently pay less than 75 percent and/or have plans that are insufficiently generous.

As the economic literature affirms, a payroll tax is almost completely borne by workers themselves.  During the Democratic Party primary, Sen. Obama criticized Sen. Clinton\'s proposal to mandate coverage by asserting she would try to force people to buy something they cannot afford and then tax them when they don\'t buy it -- leaving them worse off than they were.  Exactly the same criticism applies to Obama\'s pay-or-play mandate, explains Goodman.

A tax on labor (or mandated labor benefits) makes employment more expensive.  It encourages employers to hire fewer workers, adopt labor-saving technology, employ part-time workers, and outsource labor to independent contractors and other entities, says Goodman.

Source: John C. Goodman, "The Barack Obama Health Plan," National Center for Policy Analysis, Brief Analysis No. 628, September 5, 2008.

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