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113th Congress } { Report
2d Session } HOUSE OF REPRESENTATIVES { 113-386
=======================================================================
SAVE AMERICAN WORKERS ACT OF 2014
_______
March 26, 2014.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Camp, from the Committee on Ways and Means, submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 2575]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 2575) to amend the Internal Revenue Code of 1986 to
repeal the 30-hour threshold for classification as a full-time
employee for purposes of the employer mandate in the Patient
Protection and Affordable Care Act and replace it with 40
hours, having considered the same, report favorably thereon
with an amendment and recommend that the bill as amended do
pass.
CONTENTS
Page
I. Summary and Background...........................................2
A. Purpose and Summary................................. 2
B. Background and Need for Legislation................. 2
C. Legislative History................................. 3
II. Explanation of the Bill..........................................4
A. Repeal of 30 Hour Threshold for Classification as
Full Time Employee for Purposes of the Employer
Mandate in the Patient Protection and Affordable
Care Act and Replacement with 40 Hours............. 4
III. Votes of the Committee...........................................7
IV. Budget Effects of the Bill.......................................8
A. Committee Estimate of Budgetary Effects............. 8
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 10
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 10
D. Macroeconomic Impact Analysis....................... 18
V. Other Matters To Be Discussed Under the Rules of the House......20
A. Committee Oversight Findings and Recommendations.... 20
B. Statement of General Performance Goals and
Objectives......................................... 21
C. Information Relating to Unfunded Mandates........... 21
D. Applicability of House Rule XXI 5(b)................ 21
E. Tax Complexity Analysis............................. 21
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 21
G. Duplication of Federal Programs..................... 22
H. Disclosure of Directed Rule Makings................. 22
VI. Changes in Existing Law Made by the Bill, as Reported...........22
VII. Dissenting Views................................................24
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Save American Workers Act of 2014''.
SEC. 2. REPEAL OF 30-HOUR THRESHOLD FOR CLASSIFICATION AS FULL-TIME
EMPLOYEE FOR PURPOSES OF THE EMPLOYER MANDATE IN
THE PATIENT PROTECTION AND AFFORDABLE CARE ACT AND
REPLACEMENT WITH 40 HOURS.
(a) Full-Time Equivalents.--Paragraph (2) of section 4980H(c) of the
Internal Revenue Code of 1986 is amended--
(1) by repealing subparagraph (E), and
(2) by inserting after subparagraph (D) the following new
subparagraph:
``(E) Full-time equivalents treated as full-time
employees.--Solely for purposes of determining whether
an employer is an applicable large employer under this
paragraph, an employer shall, in addition to the number
of full-time employees for any month otherwise
determined, include for such month a number of full-
time employees determined by dividing the aggregate
number of hours of service of employees who are not
full-time employees for the month by 174.''.
(b) Full-Time Employees.--Paragraph (4) of section 4980H(c) of the
Internal Revenue Code of 1986 is amended--
(1) by repealing subparagraph (A), and
(2) by inserting before subparagraph (B) the following new
subparagraph:
``(A) In general.--The term `full-time employee'
means, with respect to any month, an employee who is
employed on average at least 40 hours of service per
week.''.
(c) Effective Date.--The amendments made by this section shall apply
to months beginning after December 31, 2013.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
H.R. 2575 would, for purposes of the employer mandate
established under the Patient Protection and Affordable Care
Act (``PPACA''), repeal the 30-hours-per-week definition of
full-time employee and the 120-hours-per-month definition of
full-time equivalents, replacing those respective thresholds
with 40-hours-per-week for full-time employees and 174-hours-
per-month for full-time equivalents.
B. Background and Need for Legislation
The majority of employers that voluntarily provide health
coverage for their employees do so for their full-time
employees, and most adopt 40 hours a week as the standard
definition for full time, consistent with Federal overtime
rules. This system successfully provides coverage for nearly
160 million Americans--by far the largest source of health
coverage in America.
Employers and employees have adapted to a system where
health benefits are voluntarily offered to full-time employees
and rarely offered to part-time employees. According to
research from the payroll benefits firm ADP, for large firms,
88% of full-time employees are eligible for benefits, while
only 15 percent of part-time workers are offered health
insurance. Since health benefits are a component of total
compensation, providing coverage for part-time workers is cost-
prohibitive for employers, and part-time employees tend to
value cash compensation over health benefits.
The employer mandate and the 30-hour rule within section
4980H of the Internal Revenue Code of 1986, as established
under PPACA, disrupt this successful system. The 30-hour rule,
in particular, forces employers who have been providing
coverage--in some cases for decades--to alter their benefit
plans, drop coverage, or shift more of their workforce to part
time to mitigate the effects of the mandated cost increases.
Industries that employ lower-skill workers, and often
provide entry-level opportunities for younger workers, are
disproportionately affected by the 30-hour rule. Recent Hoover
Institution research concluded:
The 30-hour rule puts 2.6 million workers
with a median income of under $30,000 at risk for
losing jobs or hours;
89 percent of workers affected by the rule
do not have college degrees; and
63 percent are women, and over half have a
high school diploma or less.
There are widespread reports of employers reducing the
number of hours for their workforces to below 30 hours to
avoid, or at least mitigate, the penalty taxes associated with
the employer mandate. Additionally, school districts, community
colleges, and universities have reduced work hours for
students, adjunct professors, and support staff.
On July 2, 2013, the Obama Administration delayed
enforcement of the employer mandate, and therefore the 30-hour
rule, until 2015. Despite the delay, employers have already
begun to respond to the mandate. According to the U.S. Chamber
of Commerce survey of small business executives, 71 percent of
small businesses believe the health care law makes it harder to
hire. Additionally, one-half of small businesses report that
they will either cut hours to reduce full-time employees, or
replace full-time employees with part-timers to avoid the
employer mandate.
C. Legislative History
BACKGROUND
H.R. 2575 was introduced on June 28, 2013, and was referred
to the Committee on Ways and Means.
COMMITTEE ACTION
The Committee on Ways and Means marked up H.R. 2575, the
Save American Workers Act of 2014, on February 4, 2014, and
ordered the bill, as amended, favorably reported (with a quorum
being present).
COMMITTEE HEARINGS
The problems associated with the employer mandate were
discussed at four hearings during the 113th Congress:
Oversight Subcommittee hearing on the Tax-
Related Provisions in the President's Health Care Law
(March 5, 2013);
Health Subcommittee hearing on the Delay of
the Employer Mandate (July 10, 2013);
Health Subcommittee hearing on the Delay of
the Employer Mandate Penalties and Reporting
Requirements (July 17, 2013); and
Full Committee hearing on the Impact of the
Employer Mandate's Definition of Full-time Employee on
Jobs and Opportunities (January 28, 2014).
II. EXPLANATION OF THE BILL
A. Repeal of 30-Hour Threshold for Classification as Full-Time Employee
for Purposes of the Employer Mandate in the Patient Protection and
Affordable Care Act and Replacement With 40 Hours
PRESENT LAW
In general
Under PPACA,\1\ as amended by the Health Care and Education
Reconciliation Act of 2010\2\ (generally referred to
collectively as the ``Affordable Care Act'' or ``ACA''), an
applicable large employer may be subject to a tax, called an
``assessable payment,'' for a month if one or more of its full
time employees is certified to the employer as receiving for
the month a premium assistance credit for health insurance
purchased on an American Health Benefit Exchange or reduced
cost-sharing for the employee's share of expenses covered by
such health insurance.\3\ (This is sometimes referred to as the
employer shared responsibility requirement.) As discussed
below, the amount of the assessable payment depends on whether
the employer offers its full-time employees and their
dependents the opportunity to enroll in minimum essential
coverage under a group health plan sponsored by the employer
and, if it does, whether the coverage offered is affordable and
provides minimum value.
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\1\Pub. L. No 111-148, enacted March 23, 2010.
\2\Pub. L. No. 111-152, enacted March 30, 2010.
\3\Sec. 4980H, added to the Code by section 1513 of PPACA and
amended by 10106 of PPACA and section 1003 of the Health Care and
Education Reconciliation Act of 2010. (Unless otherwise stated, all
section references herein are to the Internal Revenue Code of 1986, as
amended.) An applicable large employer is also subject to annual
reporting requirements under section 6056. Premium assistance credits
for health insurance purchased on an American Health Benefit Exchange
are provided under section 36B. Reduced cost-sharing for an
individual's share of expenses covered by such health insurance is
provided under section 1402 of PPACA. For further information on these
provisions, see Part III.B-D of Joint Committee on Taxation, Present
Law and Background Relating to the Tax-Related Provisions in the
Affordable Care Act (JCX-6-13), March 4, 2013, available on the Joint
Committee of Taxation website at www.jct.gov.
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Under the ACA, these rules are effective for months
beginning after December 31, 2013. However, the Internal
Revenue Service (``IRS'') has announced that no assessable
payments will be assessed for 2014.\4\ On February 10, 2014,
the Department of the Treasury and the IRS issued final
regulations on the employer shared responsibility requirement
and announced that no assessable payments for 2015 will apply
to applicable large employers that have fewer than 100 full-
time employees and full time equivalent employees and meet
certain other requirements.\5\
---------------------------------------------------------------------------
\4\Notice 2013-45, 2013-31 I.R.B. 116, Part III, Q&A-2.
\5\Section XV.D.6 of the preamble to the final regulations, 79 Fed.
Reg. 8544, 8574-8575, February 12, 2014.
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Definitions of full-time employee and applicable large employer
For purposes of applying these rules, full-time employee
means, with respect to any month, an employee who is employed
on average at least 30 hours of service per week. Hours of
service are to be determined under regulations, rules, and
guidance prescribed by the Secretary of the Treasury, in
consultation with the Secretary of Labor, including rules for
employees who are not compensated on an hourly basis.
Applicable large employer generally means, with respect to
a calendar year, an employer who employed an average of at
least 50 full-time employees on business days during the
preceding calendar year.\6\ Solely for purposes of determining
whether an employer is an applicable large employer (that is,
whether the employer has at least 50 full-time employees),
besides the number of full-time employees, the employer must
include the number of its full-time equivalent employees for a
month, determined by dividing the aggregate number of hours of
service of employees who are not full-time employees for the
month by 120. In addition, in determining whether an employer
is an applicable large employer, members of the same controlled
group, group under common control, and affiliated service group
are treated as a single employer.\7\ If the group is an
applicable large employer under this test, each member of the
group is an applicable large employer even if any member by
itself would not be an applicable large employer.\8\
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\6\Additional rules apply, for example, in the case of an employer
that was not in existence for the entire preceding calendar year.
\7\The rules for determining controlled group, group under common
control, and affiliated service group under section 414(b), (c), (m)
and (o) apply for this purpose.
\8\In addition, in determining assessable payments (as discussed
herein), only one 30-employee reduction in full-time employees applies
to the group and is allocated among the members ratably based on the
number of full-time employees employed by each member.
---------------------------------------------------------------------------
Assessable payments
If an applicable large employer does not offer its full-
time employees and their dependents minimum essential coverage
under an employer-sponsored plan and at least one full-time
employee is so certified to the employer, the employer may be
subject to an assessable payment of $2,000\9\ (divided by 12
and applied on a monthly basis) multiplied by the number of its
full-time employees minus 30, regardless of the number of full
time employees so certified. For example, in 2016, Employer A
fails to offer minimum essential coverage and has 100 full-time
employees, 10 of whom receive premium assistance credits for
the entire year. The employer's assessable payment is $2,000
for each employee over the 30-employee threshold, for a total
of $140,000 ($2,000 multiplied by 70, that is, 100-30).
---------------------------------------------------------------------------
\9\For calendar years after 2014, the $2,000 dollar amount, and the
$3,000 dollar amount referenced herein, are increased by the percentage
(if any) by which the average per capita premium for health insurance
coverage in the United States for the preceding calendar year (as
estimated by the Secretary of Health and Human Services (``HHS'') no
later than October 1 of the preceding calendar year) exceeds the
average per capita premium for 2013 (as determined by the Secretary of
HHS), rounded down to the next lowest multiple of $10.
---------------------------------------------------------------------------
Generally an employee who is offered minimum essential
coverage under an employer-sponsored plan is not eligible for a
premium assistance credit or reduced cost-sharing unless the
coverage is unaffordable or fails to provide minimum value.\10\
However, if an employer offers its full-time employees and
their dependents minimum essential coverage under an employer
sponsored plan and at least one full-time employee is certified
as receiving a premium assistance credit or reduced cost-
sharing (because the coverage is unaffordable or fails to
provide minimum value), the employer may be subject to an
assessable payment of $3,000 (divided by 12 and applied on a
monthly basis) multiplied by the number of such full-time
employees. However, the assessable payment in this case is
capped at the amount that would apply if the employer failed to
offer its full-time employees and their dependents minimum
essential coverage. For example, in 2016, Employer B offers
minimum essential coverage and has 100 full-time employees, 20
of whom receive premium assistance credits for the entire year.
The employer's assessable payment before consideration of the
cap is $3,000 for each full-time employee receiving a credit,
for a total of $60,000. The cap on the assessable payment is
the amount that would have applied if the employer failed to
offer coverage, or $140,000 ($2,000 multiplied by 70, that is,
100-30). In this example, the cap therefore does not affect the
amount of the assessable payment, which remains at $60,000.
---------------------------------------------------------------------------
\10\Under section 36B(c)(2)(C), coverage under an employer-
sponsored plan is unaffordable if the employee's share of the premium
for self-only coverage exceeds 9.5 percent of household income, and the
coverage fails to provide minimum value if the plan's share of total
allowed cost of provided benefits is less than 60 percent of such
costs.
---------------------------------------------------------------------------
Proposed and final regulations
The IRS issued proposed regulations on the employer shared
responsibility requirement on December 28, 2012.\11\ The
preamble to the proposed regulations invited the public to
provide comments on issues relating to the application of the
employer shared responsibility requirement. As of February 4,
2014--the date on which the Ways and Means Committee marked up
and ordered reported H.R. 2575, as amended--final regulations
had not yet been issued.
---------------------------------------------------------------------------
\11\REG-138006-12, 78 Fed. Reg. 218, January 2, 2013. The IRS
issued an advance notice of the proposed regulations on December 28,
2012. As noted above, the IRS subsequently announced that no assessable
payments will be assessed for 2014.
---------------------------------------------------------------------------
As noted above, final regulations were issued on February
10, 2014. The regulations define full-time employee (based on
an average of at least 30 hours of service a week), full-time
equivalent employee (based on 120 hours of service a month) and
hours of service, as well as providing rules for determining an
employer's full-time employees and full-time equivalent
employees, effective for periods after December 31, 2014.\12\
---------------------------------------------------------------------------
\12\Treas. Reg. secs. 54.4980H-1(a)(21), (a)(22) and (a)(24),
54.4980H-2(c), and 54.4980H-3.
---------------------------------------------------------------------------
REASONS FOR CHANGE
The Committee notes that for decades the standard work week
in the United States has been 40 hours. The Committee believes
that, by imposing a financial burden on employers with respect
to employees who work less than the standard 40-hour work week,
the Affordable Care Act creates incentives to reduce the paid
hours of part-time employees or to dismiss these employees.
Either outcome is detrimental to the employees and the economy.
The Committee believes the appropriate measure of full-time
employee status is the longstanding standard of 40 hours per
week.
EXPLANATION OF PROVISION
Under the provision, full-time employee means, with respect
to any month, an employee who is employed on average at least
40 hours of service per week (rather than 30 hours as under
present law). In addition, the number of full-time equivalent
employees for a month is determined by dividing the aggregate
number of hours of service of employees who are not full-time
employees for the month by 174 (rather than 120 as under
present law).
EFFECTIVE DATE
The provision is effective for months beginning after
December 31, 2013.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means in its
consideration of H.R. 2575, the ``Save American Workers Act of
2014.''
The bill, H.R. 2575, was ordered favorably reported as
amended by a roll call vote of 23 yeas to 14 nays (with a
quorum being present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp....................... X ........ ......... Mr. Levin........ ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Rangel....... ........ X .........
Mr. Brady...................... X ........ ......... Mr. McDermott.... ........ X .........
Mr. Ryan....................... X ........ ......... Mr. Lewis........ ........ X .........
Mr. Nunes...................... X ........ ......... Mr. Neal......... ........ X .........
Mr. Tiberi..................... X ........ ......... Mr. Becerra...... ........ ........ .........
Mr. Reichert................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. Boustany................... X ........ ......... Mr. Thompson..... ........ X .........
Mr. Roskam..................... X ........ ......... Mr. Larson....... ........ X .........
Mr. Gerlach.................... X ........ ......... Mr. Blumenauer... ........ X .........
Mr. Price...................... X ........ ......... Mr. Kind......... ........ X .........
Mr. Buchanan................... X ........ ......... Mr. Pascrell..... ........ X .........
Mr. Smith...................... X ........ ......... Mr. Crowley...... ........ X .........
Mr. Schock..................... X ........ ......... Ms. Schwartz..... ........ ........ .........
Ms. Jenkins.................... X ........ ......... Mr. Davis........ ........ X .........
Mr. Paulsen.................... X ........ ......... Ms. Sanchez...... ........ X .........
Mr. Marchant................... X
Mrs. Black..................... X
Mr. Reed....................... X
Mr. Young...................... X
Mr. Kelly...................... X
Mr. Griffin.................... X
Mr. Renacci.................... X
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 2575, as
reported.
The bill, as reported, is estimated to have the following
effects on Federal budget receipts for 2014-2024:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee states further that the bill involves no new or
increased tax expenditures.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, February 25, 2014.
Hon. Dave Camp,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2575, the Save
American Workers Act of 2013.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Jean Hearne
and Sarah Masi.
Sincerely,
Robert A. Sunshine
(For Douglas W. Elmendorf, Director).
Enclosure.
H.R. 2575--Save American Workers Act of 2013
Summary: H.R. 2575 would alter the calculation of the
number of full-time equivalent employees for the purposes of
determining which employers are subject to penalties under the
Affordable Care Act (ACA) for not offering health insurance for
their employees or for offering insurance that does not meet
certain criteria specified in the law.\1\ In addition, the
legislation would change the definition of ``full-time
employee'' used for the calculation of those penalties.
Specifically, the bill would raise the threshold that defines
full-time employment from 30 hours per week under current law
to 40 hours per week.
---------------------------------------------------------------------------
\1\The Affordable Care Act comprises the Patient Protection and
Affordable Care Act (Public Law 111-148), the health care provisions of
the Health Care and Education Reconciliation Act of 2010 (P.L. 111-
152), and the effects of subsequent judicial decisions, statutory
changes, and administrative actions.
---------------------------------------------------------------------------
Those changes to the employer responsibility requirements
of the ACA would reduce the number of employers assessed
penalties and lower the penalties assessed against employers
that do not offer insurance (or offer insurance that does not
meet certain criteria) and that have at least one full-time
employee receiving a subsidy through a health insurance
exchange. As a result, the largest budgetary effect of H.R.
2575 would be to reduce the amount of penalties collected from
employers.
As a result of those changes in who would pay penalties and
what amounts they would have to pay, CBO and the staff of the
Joint Committee on Taxation (JCT) estimate that enacting H.R.
2575 would change the sources of health insurance coverage for
some people. Specifically, in most years over the 2015-2024
period, CBO and JCT estimate that the legislation would:
Reduce the number of people receiving
employment-based coverage--by about 1 million people;
Increase the number of people obtaining
coverage through Medicaid, the Children's Health
Insurance Program (CHIP), or health insurance
exchanges--by between 500,000 and 1 million people; and
Increase the number of uninsured--by less
than 500,000 people.
As a consequence of the changes in penalties and in
people's sources of insurance coverage, CBO and JCT estimate
that enacting H.R. 2575 would increase budget deficits by $25.4
billion over the 2015-2019 period and by $73.7 billion over the
2015-2024 period. The 2015-2024 total is the net of an increase
of $83.0 billion in on-budget costs and $9.3 billion in off-
budget savings (the latter attributable to increased revenues).
Pay-as-you-go procedures apply because enacting the legislation
would affect direct spending and revenues.
JCT has determined that H.R. 2575 contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act (UMRA).
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 2575 is shown in the following table.
The costs of this legislation fall within budget function 550
(health).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in billions of dollars--
----------------------------------------------------------------------------------------------------------------------------------------------
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2014-2019 2014-2024
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Exchange Subsidies:
Estimated Budget Authority................... 0 0.1 0.8 1.4 1.7 1.7 1.9 2.2 2.3 2.3 2.3 5.8 16.8
Estimated Outlays............................ 0 0.1 0.8 1.4 1.7 1.7 1.9 2.2 2.3 2.3 2.3 5.8 16.8
Medicaid and CHIP:
Estimated Budget Authority................... 0 0.2 0.4 0.7 0.5 0.5 0.6 0.6 0.6 0.7 0.7 2.4 5.5
Estimated Outlays............................ 0 0.2 0.4 0.7 0.5 0.5 0.6 0.6 0.6 0.7 0.7 2.4 5.5
Other:
Estimated Budget Authority................... 0 * -0.2 -0.2 -0.2 -0.1 -0.2 -0.2 -0.2 -0.1 -0.1 -0.8 -1.4
Estimated Outlays............................ 0 * -0.2 -0.2 -0.2 -0.1 -0.2 -0.2 -0.2 -0.1 -0.1 -0.8 -1.4
Total Changes in Direct Spending:
Estimated Budget Authority................... 0 0.3 1.1 1.8 2.1 2.1 2.3 2.7 2.8 2.9 2.9 7.4 20.9
Estimated Outlays............................ 0 0.3 1.1 1.8 2.1 2.1 2.3 2.7 2.8 2.9 2.9 7.4 20.9
CHANGES IN REVENUESEstimated Revenues: 0 0.2 -3.4 -4.3 -4.9 -5.7 -5.8 -6.0 -6.4 -7.9 -8.7 -18.0 -52.8
On-Budget.................................... 0 0.1 -4.2 -5.2 -5.8 -6.7 -7.1 -7.3 -7.8 -8.8 -9.3 -21.9 -62.1
Off-Budgeta.................................. 0 0.1 0.8 1.0 0.9 1.0 1.3 1.3 1.4 0.9 0.6 3.8 9.3 NET INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUESChange in the Deficit............................ 0 * 4.5 6.1 7.0 7.8 8.1 8.6 9.2 10.8 11.6 25.4 73.7
On-Budget.................................... 0 0.1 5.3 7.1 7.9 8.8 9.3 9.9 10.6 11.7 12.2 29.3 83.0
Off-Budgeta.................................. 0 -0.1 -0.8 -1.0 -0.9 -1.0 -1.3 -1.3 -1.4 -0.9 -0.6 -3.8 -9.3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Numbers may not sum to totals because of rounding.
CHIP = Children's Health Insurance Program; * = savings or costs of less than $50 million.
a. All off-budget effects would come from changes in revenues. (The payroll taxes for Social Security are classified as ``off-budget.'')
Basis of estimate: Under current law, beginning in 2015,
certain large employers who do not offer health insurance
coverage that meets the affordability and minimum-value
standards defined in the ACA will have to pay a penalty to the
federal government if they have full-time employees who receive
a subsidy through a health insurance exchange.\2\ Employers
with at least 50 full-time equivalent employees (FTEs) will be
subject to that employer responsibility requirement. In 2015,
however, those employers with at least 50 but less than 100
FTEs will be exempt from the requirement if they certify that
they did not make certain reductions to health insurance
coverage or to the number of FTE employees.
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\2\Under the ACA, coverage is considered affordable if the employee
would be required to pay no more than a specified share of his or her
income (9.5 percent in 2014) for self-only coverage. In addition, the
plan offered must pay at least 60 percent of the costs of covered
benefits.
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For the purpose of determining which employers are subject
to the penalty under the ACA, the number of FTEs for a given
month is calculated by adding the number of full-time employees
(defined as those who work at least 30 hours per week) to the
number of hours of service for part-time employees in that
month divided by 120. (That figure represents an average of 30
hours a week for four weeks.)
Penalties for affected employers will be a set dollar
amount times a certain number of their full-time employees. The
penalty will be calculated slightly differently depending on
whether the employer does not offer health insurance at all or
does not offer health insurance that meets the standards
established by the ACA, as follows:
If a large employer does not offer health
insurance coverage to a certain minimum percentage of its full-
time employees, and if at least one of those full-time
employees receives a subsidy through a health insurance
exchange, the penalty will be based on the number of employees
who work at least 30 hours per week, with some adjustments.\3\
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\3\In 2015, a large employer must offer health insurance coverage
to at least 70 percent of its full-time employees. (That percentage
requirement grows to 95 percent in 2016 and later years.) In general,
the first 30 full-time employees will be excluded from the penalty
calculation for failing to provide health insurance coverage to a
certain percentage of full-time employees. However, in 2015, for
employers with at least 100 FTEs, the first 80 full-time employees will
be excluded from the penalty calculation.
---------------------------------------------------------------------------
If a large employer offers health insurance
coverage to at least the minimum percentage of full-time
workers and one or more full-time workers receive a subsidy
through a health insurance exchange, or if the coverage offered
does not meet either the affordability or minimum-value
standard defined in the ACA, the penalty will be based on the
number of employees who work at least 30 hours per week that
receive a subsidy through a health insurance exchange (up to a
maximum).
H.R. 2575 would make two changes to the calculation of FTEs
for the purpose of determining which employers are subject to
the employer responsibility requirement for a given month.
First, the number of full-time employees would be defined as
those who work at least 40 hours per week instead of those who
work at least 30 hours per week. Second, that number would be
added to the number of hours of service for part-time
employees, defined as those working less than 40 hours per
week, divided by 174 instead of 120. (That figure of 174 is
roughly equal to 40 hours per week for 52 weeks, prorated to
produce a monthly average.) For many employers, those changes
to the FTE calculation would reduce the number of FTEs, thereby
making fewer employers large enough to be subject to the
employer responsibility requirement.
In addition, H.R. 2575 would change the definition of full-
time employees for purposes of calculating the employer's
penalty. Under current law, full-time employees for whom those
penalties could potentially be assessed are defined as those
who work at least 30 hours per week. Under H.R. 2575, penalties
could be assessed only for those who work at least 40 hours per
week.
Effects on employers' incentive to offer coverage
The employer responsibility penalty under current law
increases the cost of not offering employment-based coverage
and thus increases the incentive for employers to offer
employment-based coverage. In contrast, under H.R. 2575, some
employers would no longer be subject to the employer
responsibility requirement because of the change in the
calculation of the number of FTEs. Other firms would still be
subject to the employer responsibility requirement but would
face lower penalty payments because fewer workers would be
classified as full-time for purposes of the penalty
calculation. As a result, CBO and JCT expect that more
employers would choose to not offer coverage to their
employees.
Nevertheless, most of the affected employers would continue
to offer coverage because most employers construct compensation
packages to attract the best available workers at the lowest
possible cost. That is, firms attempt to offer the mix of wages
and nonwage benefits that will be most attractive to their
current and potential employees while having the lowest cost.
Most employers would continue to offer employment-based
coverage to their employees under H.R. 2575 because their
employees prefer such coverage over insurance policies offered
through the individual market or exchanges.\4\
---------------------------------------------------------------------------
\4\See Congressional Budget Office, CBO and JCT's Estimates of the
Effects of the Affordable Care Act on the Number of People Obtaining
Employment-Based Health Insurance (March 2012), http://www.cbo.gov/
publication/43082
---------------------------------------------------------------------------
Under H.R. 2575, CBO and JCT expect that some employers
would choose to reduce the number of employees who work 40 or
more hours per week, in order to avoid or reduce the penalty.
For example, without changing the total number of hours worked
by its employees, an employer might reassign hours worked so
that there are more employees just below the 40-hour threshold
than there would otherwise be.
Also, enacting H.R. 2575 would probably provide an
incentive for some employers to redefine work hours so that
more employees would be categorized as part-time. Some
employers might seek to avoid or lower penalty payments by
reducing the number of hours counted toward the full-time
threshold without changing the actual number of hours worked or
employees' wages. For example, an employer could discontinue
counting lunch hours or breaks as work time. (The ability of
employers to make such adjustments depends on labor-related
state laws, as well as limitations under the Fair Labor
Standards Act.)
Because many more workers work 40 hours per week (or
slightly more) than work 30 hours per week (or slightly more),
the changes made by H.R. 2575 could affect many more workers
than are affected under current law. CBO and JCT expect this
effect to be limited, however, by employers' incentives to
attract the best workforce for their firm in making decisions
about hours, wages, and benefits. Even without any statutory
requirements, employers whose current workforce comprises
mostly 40-hour workers tend to offer health coverage at a
greater rate than employers whose employees typically work
between 30 and 35 hours per week. All told, CBO and JCT expect
that a small percentage of employers would either reassign or
reduce hours of employees who work 40 hours per week or
slightly more.
Effects on insurance coverage
Enacting H.R. 2575 would reduce the number of people
enrolled in employment-based coverage and thus increase the
number of people who would obtain health insurance from other
sources or would be uninsured, CBO and JCT estimate.
Specifically, if H.R. 2575 was enacted, CBO and JCT
estimate that in most years between 2015 and 2024, insurance
coverage would change in the following ways relative to CBO's
current baseline projections:
Roughly 1 million fewer people would enroll in
employment-based coverage.
Between 500,000 and 1 million more people would
obtain coverage through an exchange, Medicaid, or CHIP.
Fewer than one-half million additional people
would be uninsured.
Effects on federal revenues and spending
CBO and JCT estimate that H.R. 2575 would result in net
budgetary costs to the federal government of $73.7 billion over
the 2015-2024 period. (For purposes of this estimate, we assume
that the bill will be enacted during 2014; we expect that there
would be no effect on the budget during the remainder of fiscal
year 2014 because the employer responsibility requirement will
not take effect until 2015.) That projected increase in federal
deficits consists of a $52.8 billion net reduction in revenues
and a $20.9 billion net increase in direct spending over the
10-year period. Of the net revenue decrease, an estimated $62.1
billion would stem from a decrease in on-budget revenues,
partially offset by an estimated $9.3 billion increase in off-
budget (Social Security) revenues.
The reduction in revenues would result from smaller
collections of penalty payments by employers. CBO and JCT
estimate that those payments would be $63.4 billion lower over
the next 10 years for two reasons, a reduction of more than 40
percent: Fewer employers would be subject to the employer
responsibility provision and thus would be exempt from paying
penalties; and some employers that would be assessed penalties
under the bill would make smaller penalty payments because
fewer employees would be included in the calculation for those
employers' penalty assessments.
The reduction in revenues for penalty payments would be
partially offset, CBO and JCT estimate, by a $12.4 billion
increase in tax revenues over the 2015-2024 period because
fewer people would be enrolled in employment-based coverage.
That change would lead to a larger share of total compensation
taking the form of taxable wages and salaries and a smaller
share taking the form of non-taxable health benefits. (Other
effects, including changes in the amount of exchange subsidies
discussed below, would account for the remaining $1.8 billion
net decrease in revenues.)
CBO and JCT estimate that, over the 2015-2024 period,
outlays would be higher (by $16.8 billion) and revenues would
be lower (by $2.1 billion) under H.R. 2575 because more people
would obtain premium and cost-sharing subsidies through
insurance exchanges.\5\ That change would mostly reflect a
movement away from employment-based insurance.
---------------------------------------------------------------------------
\5\Subsidies for health insurance premiums are structured as
refundable tax credits; the portions of such credits that exceed
taxpayers' liabilities are classified as outlays, whereas the portions
that reduce tax payments are reflected in the budget as reductions in
revenues.
---------------------------------------------------------------------------
In addition, CBO estimates that federal outlays for
Medicaid and CHIP would be $5.5 billion higher over the 2015-
2024 period because more people would enroll in those programs.
Most of that additional enrollment would be by people who would
otherwise have employment-based insurance under current law.
Other, smaller effects would reduce outlays by $1.4 billion
over the 10-year period.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays and revenues that are
subject to those pay-as-you-go procedures are shown in the
following table. Only on-budget changes to outlays or revenues
are subject to pay-as-you-go procedures.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 2575, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON FEBRUARY 4, 2014
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
----------------------------------------------------------------------------------------------------------------------------------------------
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2014-2019 2014-2024
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE OR DECREASE (-) IN THE ON-BUDGET DEFICITStatutory Pay-As-You-Go Impact................... 0 120 5,324 7,078 7,912 8,832 9,324 9,907 10,593 11,672 12,244 29,266 83,006
Memorandum:
Changes in Outlays........................... 0 260 1,135 1,842 2,084 2,090 2,273 2,655 2,770 2,881 2,926 7,412 20,917
Changes in Revenues.......................... 0 141 -4,188 -5,236 -5,828 -6,742 -7,051 -7,253 -7,822 -8,791 -9,318 -21,854 -62,088
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers may not sum to totals because of rounding.
Intergovernmental and private-sector impact: JCT has
determined that H.R. 2575 contains no intergovernmental or
private-sector mandates as defined by UMRA.
Estimate prepared by: Sarah Masi, Jean Hearne, and staff of
the Joint Committee on Taxation.
Estimate approved by: Holly Harvey, Deputy Assistant
Director for Budget Analysis.
D. Macroeconomic Impact Analysis
In compliance with clause 3(h)(2) of rule XIII of the Rules
of the House of Representatives, the following statement is
made by the Joint Committee on Taxation with respect to the
provisions of H.R. 2575: the effects of the bill on economic
activity are so small as to be incalculable within the context
of a model of the aggregate economy.
Under present law, firms that employ more than 50 full-time
equivalent employees are required either to provide qualifying
affordable health coverage to their full-time employees or pay
mandate penalties based on the number of full-time
employees.\13\ The bill changes the calculation of ``full-time
equivalent employee'' such that fewer firms cross this
threshold to become subject to the requirement. It also changes
the definition of ``full-time employee'' from an employee who
works at least 30 hours per week to an employee who works at
least 40 hours per week, thus reducing the number of employees
to whom firms are required to provide health coverage. Both
provisions of the bill, therefore, provide some firms relief
from a specific form of employment cost required under present
law.
---------------------------------------------------------------------------
\13\As discussed elsewhere in this report, final regulations
granted transition relief for firms employing between 50 and 100
employees in 2015.
---------------------------------------------------------------------------
Under present law and under the bill, the amount employers
are willing to pay in employment costs for their employees is
determined by the amount they expect employees to generate in
additional output. Compensation costs include wages, benefits
(including health coverage), and associated employment taxes
(including any mandate penalty). If a change in tax policy
changes the relative costs of these components of compensation,
it is expected that their relative shares would be adjusted to
minimize after-tax costs to employers while maximizing after-
tax compensation for employees. Thus, one behavioral response
to the health coverage mandate is that employers may reduce
cash wages or other benefits in order to hold their total
compensation costs fixed. In this way, firms can avoid
incurring increased costs of overall compensation. It is
expected that the relaxation of the coverage mandate provided
for in the bill will not affect overall employment costs for
firms able to substitute between health benefits or the penalty
and cash wages and other benefits. These types of adjustments
are not expected to have an effect on overall economic growth,
although they could have an effect on taxable income. The
effects of these adjustments on taxable income are accounted
for in the conventional revenue estimate.
However, some employers may not be able to reduce cash
wages and other benefits sufficiently to hold their employment
costs fixed, either because their wage rates are at or near the
minimum wage or because they are subject to some other
institutional restrictions on adjusting wages and benefits,
such as civil service requirements or collective bargaining
contracts. And some employers may calculate that their
employees would be better off with a small reduction in hours
than with a reduction in other forms of compensation. For these
employers, the employer mandate penalty under present law may
result in increased costs, and provide some incentive for firms
to adjust employment practices to avoid the requirements. It is
expected that where possible, firms would reallocate hours
worked among employees to minimize the number of employees
deemed to be ``full-time.'' There have been many survey and
anecdotal accounts of employers taking or planning to take such
action under current law.\14\ These accounts do not provide
enough information for us to be able to quantify the extent to
which the reduction in hours per employee would result in an
overall reduction in hours, or a reallocation of hours among
employees.\15\ Because the health insurance requirements are
unlikely to affect demand for the services of the employer, if
the employer can minimize its exposure to the requirements
without changing its scope of operations, it is expected to do
so, by reallocating hours among employees. Such adjustments are
not expected to have an effect on overall economic growth,
although they would affect the allocation of disposable income
among individual employees.
---------------------------------------------------------------------------
\14\See, for example, John Tozzie, ``Franchise Industry: We're
Already Cutting Hours Because of Obamacare,'' BloombergBusinessweek,
November 13, 2013, http://www.businessweek.com/articles/2013-11-13/
franchise-industry-we-re-already-cutting-hours-because-of-obamacare;
and testimonies of Lanhee J. Chen, Peter Anastos, Neil Trautwein,
Thomas J. Snyder and Helen Levy at the Ways and Means Committee
``Hearing on the Impact of the Employer Mandate's Definition of Full-
time Employee on Jobs and Opportunities,'' January 28, 2014.
\15\It is too soon for statistically testable data on the response
of employers to the employer mandate to be available. There has been
some statistical analysis of responses to state and local employer
health insurance mandates. Thomas C. Buchmeiller, John DiNardo, and
Robert Valleta find no overall reduction in hours or wages over a 25-
year period in response to an employer health insurance mandate in
Hawaii, but some trend toward substitution of part-time workers for
full-time workers in ``The Effect of Employer Health Insurance Mandate
on Health Insurance Coverage and the Demand for Labor in Hawaii,''
American Economic Journal: Economic Policy 3, 2011, pp. 25-51. Carrie
H. Colla, William H. Dow, and Arindrajit Bue find no evidence of a
change in employment or wages over a much shorter, 18 month time period
in response to enactment of a health insurance mandate in San Francisco
in ``The Labor Market Impact of Employer Health Benefit Mandates:
Evidence from San Francisco's Health Care Security Ordinance,'' NBER
Working Paper No. 17198, July, 2011.
---------------------------------------------------------------------------
However, some employers may find that the adjustment costs
associated with reallocating hours among employees sufficiently
large that they prefer to reduce the total number of hours
worked or reduce hiring to stay below the 50 full-time
equivalent employee threshold. This could have an effect on
overall economic activity, but it would be quite small relative
to the overall size of the economy under present law, given the
small number of employees working for employers subject to the
mandate whose hours of work are near enough to the 30-hour
threshold to make reducing hours worked to below 30 per person
feasible.
The change in the definition of full-time employee in the
bill removes incentives for firms to reduce hours for workers
below 30 hours per week. But it would increase the feasibility
of reducing hours enough to avoid the mandate for employers
whose employees typically work 40-hour weeks. Roughly five
times as many workers work 40 hours per week as work 30 to 34
hours per week; thus the incentive to re-allocate or reduce
hours could potentially affect a larger share of the workforce
under the bill than it does under present law.\16\ Offsetting
this asymmetry, however, is the fact that a much larger share
of those who work 40 hours than those who work 30 hours already
have offers of qualifying employer coverage even without the
employer mandate penalty, and thus their employment costs would
not be affected by the bill.\17\
---------------------------------------------------------------------------
\16\Bureau of Labor Statistics, ``Labor Statistics from the Current
Population Survey,'' February 2013. Available at: http://www.bls.gov/
cps/cpsaat19.htmhttp://www.bls.gov/cps/cpsaat19.htm.
\17\One study notes that almost 80 percent of those in firms of 100
or more who work 37 hours or more per week are covered by employer
insurance, while fewer than 50 percent of those who work between 30 and
36 hours per week have employer insurance. See UC Berkeley Labor
Center, ``Which Workers are Most at Risk of Reduced Work Hours under
the Affordable Care Act,'' February 2013. Available at: http://
laborcenter.berkeley.edu/healthcare/reduced--work--hours13.pdf.
According to an ADP study of large employers, 88 percent of firms offer
health coverage to their full time workers, while only 15 percent of
firms offer it to part-time workers. see: ADP Research Institute,
``ADP's 2012 Study of Large Employer Health Benefits Benchmarks for
Companies with 1,000+ Employees,'' pp.7-8. Available at: http://
www.adp.com//media/RI/whitepapers/NAS%20Health%20Benefits-
WhitePaper.ashx, at pp. 7-8.
---------------------------------------------------------------------------
The bill would eliminate possible reductions in economic
activity related to 30-hour workers under present law. However,
it could provide an additional incentive for employers whose
employees work 40 hours per week to rearrange or reduce their
hours to fall under the threshold. It is anticipated that under
the bill, employers with 40-hour workforces would use the same
strategies described for the 30-hour employers to minimize
their exposure to costs imposed by the mandate penalty. Most of
these strategies would not affect overall economic activity,
but it is possible that some of the workers who lose their
health insurance under the bill would reduce their work hours
in order to qualify for exchange subsidies, thus offsetting
gains from restored labor for those who work close to 30 hours.
In addition, under the bill there might be some employers of
40-hour workers who would newly view compliance with the
employer insurance requirements as a marginal decision, and for
whom adjustment costs would be sufficient to cause an overall
reduction in their hours worked and output thus also
potentially offsetting gains in activity related to removing
possible present-law incentives to reduce hours for 30-hour
workers.
While the bill is likely to change which employers
reallocate or reduce hours worked for their employees, the net
change in this practice relative to present law is expected to
be quite small. The estimated tax savings for employers due to
this bill, while important to individual employers, are quite
small relative to overall employment costs in the economy.
Thus, the effects of the bill on the economy are too small and
uncertain to calculate within JCT macroeconomic models.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives (relating to oversight findings),
the Committee advises that it was as a result of the
Committee's review of the provisions of H.R. 2575 that the
Committee concluded that it is appropriate to report the bill,
as amended, favorably to the House of Representatives with the
recommendation that the bill do pass.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. Applicability of House Rule XXI 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill, and states that the bill does not
involve any Federal income tax rate increases within the
meaning of the rule.
E. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service
Restructuring and Reform Act of 1998 (the ``IRS Reform Act'')
requires the staff of the Joint Committee on Taxation (in
consultation with the Internal Revenue Service and the Treasury
Department) to provide a tax complexity analysis. The
complexity analysis is required for all legislation reported by
the Senate Committee on Finance, the House Committee on Ways
and Means, or any committee of conference if the legislation
includes a provision that directly or indirectly amends the
Internal Revenue Code and has widespread applicability to
individuals or small businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the IRS Reform Act because
the bill contains no provisions that amend the Code and that
have ``widespread applicability'' to individuals or small
businesses, within the meaning of the rule.
F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
G. Duplication of Federal Programs
In compliance with Sec. 3(j)(2) of H. Res. 5 (113th
Congress), the Committee states that no provision of the bill
establishes or reauthorizes: (1) a program of the Federal
Government known to be duplicative of another Federal program,
(2) a program included in any report from the Government
Accountability Office to Congress pursuant to section 21 of
Public Law 111-139, or (3) a program related to a program
identified in the most recent Catalog of Federal Domestic
Assistance, published pursuant to the Federal Program
Information Act (Public Law 95-220, as amended by Public Law
98-169).
H. Disclosure of Directed Rule Makings
In compliance with Sec. 3(k) of H. Res. 5 (113th Congress),
the following statement is made concerning directed rule
makings: The Committee estimates that the bill requires no
directed rule makings within the meaning of such section.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle D--Miscellaneous Excise Taxes
* * * * * * *
CHAPTER 43--QUALIFIED PENSION, ETC., PLANS
* * * * * * *
SEC. 4980H. SHARED RESPONSIBILITY FOR EMPLOYERS REGARDING HEALTH
COVERAGE.
(a) * * *
* * * * * * *
(c) Definitions and Special Rules.--For purposes of this
section--
(1) * * *
(2) Applicable large employer.--
(A) * * *
* * * * * * *
[(E) Full-time equivalents treated as full-
time employees.--Solely for purposes of
determining whether an employer is an
applicable large employer under this paragraph,
an employer shall, in addition to the number of
full-time employees for any month otherwise
determined, include for such month a number of
full-time employees determined by dividing the
aggregate number of hours of service of
employees who are not full-time employees for
the month by 120.]
(E) Full-time equivalents treated as full-
time employees.-- Solely for purposes of
determining whether an employer is an
applicable large employer under this paragraph,
an employer shall, in addition to the number of
full-time employees for any month otherwise
determined, include for such month a number of
full-time employees determined by dividing the
aggregate number of hours of service of
employees who are not full-time employees for
the month by 174.
* * * * * * *
(4) Full-time employee.--
[(A) In general.--The term ``full-time
employee'' means, with respect to any month, an
employee who is employed on average at least 30
hours of service per week.]
(A) In general.--The term ``full-time
employee'' means, with respect to any month, an
employee who is employed on average at least 40
hours of service per week.
* * * * * * *
DISSENTING VIEWS
Because of the short notice, the Joint Committee on
Taxation (JCT) and the Congressional Budget Office (CBO) were
unable to provide the Committee with estimates on both cost and
insurance coverage changes as a result of the bill. In fact,
one reason the analysis is unavailable is because the effects
of the legislation are so complicated. Given that this
legislation could result in substantial compensation and
coverage shifts for anyone who works between 30 and 40 hours a
week, it will have significant budgetary effects, including
both a loss of revenues and increased federal spending. Under
the legislation, many employers would no longer be required to
offer affordable coverage or pay a ``free rider'' penalty to
help offset their employees' health coverage in the Exchanges
or Medicaid.
No member should be asked to vote blindly on legislation
with such potentially far-reaching implications. To that end,
numerous important questions went unanswered during the
Committee's markup, and still remain unanswered, including, but
not limited to, the following:
1. How much will this bill cost taxpayers?
2. How much will this bill increase federal spending?
3. What is the estimate of lost revenue resulting from
fewer employers being subject to employer responsibility
penalties?
4. How many Americans (workers and dependents) will lose
their job-based health insurance coverage as a result of this
bill?
5. How many Americans will be forced to shift from employer
coverage to Medicaid and the Exchanges as a result of this
bill?
6. How many Americans will remain or become uninsured as a
result of this bill?
7. How many Americans will have their hours cut or
otherwise lose wages as a result of this bill?
8. Which income groups are most affected by these changes?
All of these questions are important to understand the cost
and health insurance coverage effects of this legislation. The
upshot is that it may well increase the federal deficit while
simultaneously decreasing employer-sponsored insurance
coverage. If that is so, it is two steps in the wrong
direction.
While JCT and CBO have been unable to offer estimates at
this time, several non-partisan researchers have found that
raising the threshold of full-time from 30 hours to 40 hours
would place two to five times as many workers at risk of having
their hours just slightly reduced in order to avoid employer
responsibility requirements. The 30-hour threshold was designed
to minimize gaming, since the overwhelming majority of
businesses currently use a threshold higher than 30 hours and
would have to substantially reduce hours to avoid their
responsibility. The fact of the matter is that a business
generally operates with either a part-time or full-time work
force. There aren't many employers who will re-tool their
entire business practice and staffing model to avoid the 30-
hour requirement, but there are those who already operate in a
part-time workforce or are planning to do so for other reasons.
The simple fact is that some employers want the law changes
because it is difficult to avoid their responsibility under a
30-hour standard. This is not about protecting employee
benefits, it is about protecting businesses. That's why the
legislation is opposed by Consumers Union, AFL-CIO, AFSCME, and
the National Education Association.
In fact, recent studies provide little evidence that the
Affordable Care Act (ACA) has created an incentive to
significantly shift toward part-time work. We fear moving to
40-hours would affect many more workers and invite serious
gamesmanship as employers tweak work schedules to reduce hours
and avoid their responsibility to offer coverage or contribute
to the public cost of coverage for their workers.
The bill is the latest in a continued series of attacks by
the Majority on the ACA. Republicans continue to blame the ACA
for business decisions that would occur even without reform. It
is disingenuous for ACA opponents to claim workforce changes
years in advance of the ACA employer responsibility provisions
taking effect. Since 2010, we have heard claims of job loss,
benefit cuts and other draconian steps to avoid taking
responsibility for supporting or helping to fund employee
health benefits. However, just this morning, the CBO reported
that there is ``no compelling evidence that part-time
employment has increased as a result of the ACA.'' The report
also indicated that labor force changes predicted under the ACA
are ``almost entirely because workers will choose'' to leave
jobs they no longer want or need, now that they can obtain
health benefits elsewhere. This frees up those who want to stay
home to raise children, need to care for an ailing relative, or
want to start a new business. As further proof that the ACA is
not the ``job killer'' claimed by the Republican, the private
sector has added 8.1 million jobs since the ACA was enacted in
March, 2010.
This bill reiterates the misplaced priorities of the
Committee's majority. This bill was brought before the
Committee on Ways and Means despite the many pressing issues
over which we have exclusive jurisdiction. Among other items,
we are in imminent need of legislation to raise the debt
ceiling. We have not considered legislation to help more than
1.6 million long-term uninsured Americans hurt by the
expiration of emergency unemployment insurance. Instead of
considering these key measures, H.R. 2575 has been rushed
before the Committee without any firm information on its cost
and coverage effects. Under this legislation, millions of
Americans are at risk of losing their job-based health benefits
or having their hours cut or both. It should be no surprise
that the Democratic Members of the Committee on Ways and Means
voted against H.R. 2575.
In sum, while we stand ready to work across the aisle to
perfect health reform and pursue technical corrections, we
oppose efforts that would undermine its core tenets and lead to
a loss in job-based benefits or wages for American workers and
their families.
Sincerely,
Sander Levin.
Charles B. Rangel.
Jim McDermott.
John Lewis.
Richard E. Neal.
Xavier Becerra.
Lloyd Doggett.
Mike Thompson.
John B. Larson.
Earl Blumenauer.
Ron Kind.
Bill Pascrell, Jr.
Joseph Crowley.
Allyson Y. Schwartz.
Danny K. Davis.
Linda T. Sanchez.
