Neither Health Nor Wealth
Health economist John Goodman, who has been referred to as the father of the health savings account (HSA), published an article a few days ago looking at how the new health care law might impact the labor market. It’s not pretty:
Right now we’re estimating the cost of the minimum benefit package that everyone will be required to have at $4,750 for individuals and $12,250 for families — understanding that the proclivity in this Congress and in this Department of Health and Human Services is to add benefits, not reduce them, making the package even more expensive. That translates into a minimum health benefit of $2.28 an hour for full time workers (individual coverage) and $5.89 an hour (family coverage) for fulltime employees.
Granted, the law does not specify how much of the premium must be paid by the employer versus the employee — other than a government requirement that the employee’s share cannot exceed 9.5% of family income for low- and moderate-income workers and an industry rule of thumb that employers must pick up at least 50% of the tab. But the economic effects are the same, regardless of who writes the checks.
In four years’ time, the minimum cost of labor will be a $7.25 cash minimum wage and a $5.89 health minimum wage (family), for a total of $13.14 an hour or about $27,331 a year. (I think you can see already that no one is going to want to hire low-wage workers with families.)
Employers could also dump workers onto government exchanges, but that costs them $2,000 in penalties per instance. Either way, the costs of employing low-productivity employees will rise dramatically, which means that not only will the health care reform bill fail to increase access to health care for many low-income people — it may also cost them their jobs.