Impact on the Labor Market
This proposal, like others to reform the health insurance system, could affect labor markets in several ways.10
• Requiring employers to offer health insurance—or pay a fee if they do not—would be
likely to reduce employment, although the effect would probably be small.
• Providing new subsidies for health insurance that decline in value as a person’s
income rises could discourage
some people from working more hours.
• Increasing the availability of health insurance that is not related to employment could
lead more people to retire before age 65
or choose not to work at younger ages. It
encourage other workers to take jobs that better match their skills, because
they would not have to stay in less desirable jobs solely to maintain their health
Under the proposal, employers with annual payroll above specified levels would be required to offer health insurance to their workers and contribute a significant share toward the premium or pay a tax equal to as much as 8 percent of their total payroll.
For the firms that chose not to offer qualified insurance, that penalty would increase the cost of employing each worker by somewhat less than 8 percent (because total compensation generally exceeds the taxable payroll to which this fee would apply). The overall impact on employment would probably be muted
, however, because employers would be expected to pass the costs of such fees on to workers in the form of lower wages than would otherwise be paid—just as the costs paid by employers for health insurance are generally passed on to workers. Because the requirement would not be instituted until 2013, employers would be able to plan for its implementation; CBO also projects that the economy will have largely recovered from the current recession by that date. Nonetheless, such a change would tend to reduce the hiring of workers at or near the minimum wage, because their wages might not be able to decline by the full amount of the fee
(or by the costs of the health insurance that would have to be provided to avoid the fee). Still, the impact of the proposal on low-wage workers would probably be small
because studies suggest that moderate increases in the minimum wage generally have limited effects on employment. An 8 percent increase in the cost of hiring a worker.