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Angie Drobnic Holan
By Angie Drobnic Holan August 26, 2009

Health care bill does not 'force' employers to drop coverage

Rep. Ginny Brown-Waite sent a mailing to constituents explaining her opposition to the Democrats' health care reform plan.

"Unfortunately, I believe the legislation currently being considered in the House of Representatives could spark the government takeover of health care," she wrote. "The American people will have fewer choices, rationed care and higher costs. This is the last thing we need right now."

Brown-Waite, a Florida Republican, lists bullet points for why she opposes reform. One of the points says, "Any Government-Run 'Public' Plan ... Forces more employers to drop employee coverage due to rising costs and pay an additional  8% payroll tax for each worker."

Her phrasing is misleading. As we've noted before , the House health care reform bill leaves the employer-provided health insurance in place. It seeks to make it easier for individuals to buy health insurance on their own by creating a national health care exchange, a kind of one-stop shop for health insurance. One of the options on the exchange will be a government-run plan that provides basic coverage at a price likely to be lower than private insurers. 

So her description of the overall health bill as a "government-run 'public' plan" is a distortion of the plan. That is only one element, and a small one at that.

In another item, we addressed claims from the mailer about how much the health bill would cost. Here, we'll address her claim that health reform "forces more employers to drop employee coverage due to rising costs and pay an additional 8% payroll tax for each worker."

It's true that the overall plan imposes a penalty on employers who don't offer health insurance to their workers. Employers with payrolls over $400,000 pay an 8 percent penalty on their total payroll. That means it's not a tax for "each worker," but a tax on overall payroll. Small businesses are exempt from a penalty if their total payroll is less than $250,000 a year.

We've read all 1,000 pages of the House bill, though, and it seems clear that the penalty is intended to be a disincentive to dropping health care insurance. The tax penalty is part of a section titled "Shared Responsibility" that includes a requirement that all individuals carry health insurance.

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Brown-Waite writes that the plan forces more employers to drop coverage "due to rising costs." Some who oppose the reform believe that it will inevitably result in higher costs, forcing employers to drop coverage. But that would be an unintended consequence. The exchange is intended to foster competition and lower costs, not force people into a public plan. (For more details on this issue, read our story Health care reform: a simple explanation .) The mailer gives the impression that the bill forces employers to drop coverage and then taxes them to create a government plan.

We turned to the Employee Benefit Research Institute, a nonpartisan research center that collects and analyzes data on employee benefit plans. The institute does not take positions on policy issues. We asked if it was likely that employers would drop coverage if the House bill passed.

"I don't think anybody really knows what employers are going to do," said Paul Fronstein, a senior researcher.

Employers offer benefits voluntarily right now, he said, and they do it for business reasons, because it helps them recruit and retain workers. Most workers prefer not to have to buy insurance on their own.

"Employers offer coverage to be competitive in the labor market, and they offer coverage because their workers have no alternative due to the dysfunctional individual market," he said.

If health reform makes the individual market more competitive, employers might not feel like they must offer health benefits to retain their workers.

We should note that the tax penalty, sometimes called an employer mandate, remains controversial and may not be part of the final legislation.

We find Brown-Waite's statement misrepresents the way the bill works. We asked her office for an explanation but got no response. It's worth noting that the mailing reads like campaign literature, but was actually paid for with tax dollars. Members of Congress get to mail their constituents without paying postage, a perk known as "franking," and Brown-Waite's mailer clearly states it was "prepared, published and mailed at taxpayer expense."

We find Brown-Waite's mailer does not accurately describe the bill. She incorrectly describes the overall plan as a "government-run 'public' plan." She is right that there is an 8 percent tax, but she mischaracterizes it as a tax on all businesses, when it is a tax on employers who do not offer health insurance. We rate her statement Barely True.

Editor's note: This statement was rated Barely True when it was published. On July 27, 2011, we changed the name for the rating to Mostly False.

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Health care bill does not 'force' employers to drop coverage

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