Immigration Bill's Health Care Provisions Could Get U.S. Workers Fired

The Senate-passed immigration bill exempts millions of non-American workers from the health insurance mandate imposed on most Americans. Thus employers would not be penalized for failing to provide them with health coverage, making the newly legalized workers much cheaper to hire. See the problem?

Most of the discussion about health care in the Senate's immigration bill—known as the Border Security, Economic Opportunity, and Immigration Modernization Act of 2013 (S. 744), which passed the Senate on June 27 by a vote of 68 to 32—has been to ask whether those who are given temporary legal status would get the same subsidies available to millions of lower- and middle-income American workers. And the answer is no—or at least they aren't supposed to.

But the immigration bill also exempts those given that new immigration status, referred to as a "registered provisional immigrant" (RPI), from having coverage.

What has not received much attention is how the employer mandate to provide coverage and the RPI individual exemption from having coverage could affect hiring practices. (See the National Immigration Law Center's summary here.)

The employer mandate to provide coverage, recently postponed for one year, significantly increases the cost of hiring a new employee. But that economic pain will be felt disproportionately by employers who hire lots of low-skilled, lower-income workers. That's because the cost of coverage, which varies little across income levels, would be a much bigger percentage of a lower-income worker's wages.

For example, according to the Kaiser Family Foundation, the average cost of employer-provided (PPO) coverage for just the worker was $5,850 in 2012, with workers contributing on average 18 percent of the premium and employers paying 82 percent. Family coverage was $16,356, with workers contributing 28 percent and employers 72 percent.

If an employer being forced to provide coverage to workers making $20,000 pays, say, 75 percent of the employee's premium, that's about $4,400, or 22 percent, over and above that $20,000 income.

The employer mandate means that companies hiring lots of lower-income workers could face a cost of $4,000-plus (depending on the employer's contribution level) per full-time American employee. Alternatively, they would have to pay a $2,000 per-employee penalty for not providing coverage ($3,000 under certain conditions).

On the other hand, if employers hire the newly legalized immigrant workers, they don't have to provide them with coverage (as long as they aren't providing any similarly situated employee with coverage). ...