John Goodman is right in his argument that, as a matter of economic theory, and in the light of some empirical research, it is the case that employers will try to shift as much of the cost of fringe benefits as they can back into lower take-home pay for workers. H overstates the case a bit by arguing the backward shift is $ for $. It is a bit more complicated than that, depending on the structure of the labor market. As a matter of theory, for every $ of employer-paid fringe benefits take home pay may fall by less or more than a dollar or by a dollar. If anyone is interested in my lecture notes on the topic, just e-mail me (reinhard@princeton.edu) sith subject "ESI".

In this case, the cost of the mandated benefit seems small. Assuming a 2,000 hour work year, $750 per year payment uynder "play or pay" is less than a 40 cent per hour increase. It won't ruin the economy. If you worry about our economy, worry about Wall Street, whose nit wits can cause infinitely more unemployment. Who knows what they'll dream up next?

I have never really understood this "shared responsibility" cliche used in the health reform debate. We don't apply this concept in education. Why in health care? Why should not the responsibility be shared among citizens along, with the help of government as an intermediary? Would it not be better to let employers make and sell widgets as efficiently as they can, rather than dragging them in as part of our social security system?

In the end, I believe the only reason for looking to employers as a source of financing health care is not that health care is their moral or legal responsibility, but that they represent a solid and law-abiding tax base.

Updated at 11:20 a.m. on July 2.

Democratic leaders of the Senate HELP Committee today proposed a new employer responsibility provision for the panel's health care reform plan. Employers with more than 25 workers would have to pay $750 annually for each uncovered employee. Here are the details released this morning.

SHARED RESPONSIBILITY OF EMPLOYERS

A core value in the HELP Committee’s Affordable Health Choices Act is the principle of “shared responsibility.” To solve the nation’s health care coverage and cost crises, everyone must be part of the solution – government, individuals, medical providers, insurance companies, pharmaceutical companies, and employers.

Most employers offer and provide quality health insurance coverage to their workers and those workers’ families. These employers, especially smaller ones, need support to continue meeting this responsibility, and the Affordable Health Choices Act will provide significant new support. Other employers are not meeting their responsibilities, in whole by offering no coverage to any of their workers, or in part, by leaving a substantial part of their workforce without any coverage.

Repeated national polls demonstrate that most Americans want shared responsibility by all parties, including employers. Surveys show that two‐thirds of Americans consistently support a requirement for employers to provide coverage to their workers or else pay an assessment to help support coverage for those workers.

The Affordable Health Choices Act sets a new framework to achieve shared responsibility:

• Employers who do not offer adequate coverage to their full‐time workers will be assessed an annual fee of $750 for each uncovered employee;

• Employers who do not offer adequate coverage to their part‐time workers will be assessed an annual fee of $375 for each uncovered employee;

• Firms with fewer than 25 employees will be not assessed;

• Employers must contribute at least 60 percent to the cost of monthly premiums to avoid the assessment;

• Assessments will be collected quarterly;

• The Secretary of Health & Human Services, in collaboration with the Secretaries of the Treasury and Labor, will establish rules and procedures to implement this requirement.

I love how James Gelfand's arguments are all about keeping costs low for big business, and have nothing to do with making sure the American worker is happy and healthy. It really shows you where his organization's (or should I say, front group's) heart is, especially considering the intense small business support for real health reform.

Tell me, James, do you support other ways for business to lower costs? Businesses could lower cost by moving all of our jobs overseas, is that a good idea? Businesses can lower costs by paying their workers less than minimum wage, is that a good idea? Businesses can lower costs by forcing their workers to work 14-hour shifts, that's a good idea, too, right? How about employing children? I bet they'd work for less.

America's businesses have a responsibility to their employees not to destroy their lives. That's why an 8-hour workday is standard, why business can no longer exploit child labor, and why we have all kinds of workplace safety laws. Health care is part of the same issue. Everyone in this country needs health care, because at some point in our lives, we will all get sick. And so, everyone in society should have a hand in keeping society healthy. Shared responsibility is key. Workers, business, and government should share the cost of health care. It's only fair, and in the long run, it will help American workers lead longer, more productive lives, and that's good for business.

In fact, scholars Jacob Hacker, Ken Jacobs, and Phillip Cryan found that if employers contributed to an overall health reform system, it would actually create jobs, because more people would be able to work because they would have health care.

Now, I do agree with Dan Danner a bit, in that forcing employers to cover their workers without lowering health care costs wouldn't be the right thing to do. These costs are the real problem, and we must get them under control. Of course, there's one thing that would actually control those costs by introducing choice and competition - something lacking in the insurance market today - a public health insurance option.

Lastly, people like Gelfand, Danner, and Goodman complain incessantly that health reform will destroy the employer-based insurance market. And yet, they oppose asking employers to pitch in to help cover their employees in the employer-based health insurance market. Well, which is it? Do you want to support the employer-based system? Because if so, that's what shared responsibility is - an incentive for business to cover their employees, thus strengthening the employer-based system. But they're against shared responsibility, so what are they for?

Well, they're for what can make them the most money. They're happy to have business pay for health care if they think it will attract workers, and they're just as happy to drop it when it gets to expensive. The health of employees is never a concern, only the bottom line.

Keep that in mind when you read business's take on health reform.

I agree with James and Dan.

All the economic evidence shows that health insurance is a dollar for dollar substitute for wages. A mandate on employers, therefore, is a stealth mandate on employees. The ultimate burden falls completely on the shoulders of workers.

The problem with all of these is they are mandates on businesses and they don't fundamentally address the problems of unsustainable costs in our healthcare system. Running any business or, more importantly, a small business, is risky business and putting additional financial burdens of any magnitude is harmful. You ask how Congress should treat small business. Bring our costs down and give us a reformed marketplace that thrives on competition, choice and sustainability.

Unfortunately, many in Congress have divorced themselves from reality and think that a mandate on employers to provide health insurance coverage or pay new taxes will help workers. This couldn’t be further from the truth. Marilyn’s question this week demonstrates that these politicians have moved on in their deliberations from whether to have a mandate, to just how exactly they will implement one. Rather than pick the “best bad policy” from the three approaches listed above, I think it would be valuable to take a step back.

First of all, who is insisting on these policies? Unions and the front groups (“coalitions”) they fund and run. Keep in mind, these same unions who are demanding that others pay have managed to convince many lawmakers that unions should be exempt from a new tax on benefits – meaning that every non-union working American will be subsidizing unions. Remember that unions see the whole health reform debate as a money-making opportunity.

To understand why they are so insistent on these policies, we have to look at who will be hurt, and who will be helped by employer mandates. Employer mandates make workers less valuable – every hiring decision includes an examination of new costs that will be incurred, and mandates raise the costs of maintaining a workforce. Most union workers, however, already have bargained for health care benefits, and most union workers make more money for doing the same jobs that non-union workers do. This means that new mandates will primarily increase the costs of non-union labor.

So what will become of the non-unionized, low-wage workers who will be much more expensive to employers because of the new mandate? They’ll lose their jobs. Or the jobs they would have obtained will never be created.

In recent testimony before the House Ways and Means Committee, the justification given by a union for demanding an employer mandate was dual: a mandate would bring in revenue and would make things fair between employers. Both of these seem very bizarre reasons.

The only place in the country where a real employer mandate was tried and we have any useful data on it (sorry San Fran), is Massachusetts. And it didn’t really bring in any revenue there. In fact, counting on that revenue in part helped lead the Massachusetts health reform program to its current dire budgetary situation. So when people insist an employer mandate will help pay the $1+ trillion bill for health reform, we should be skeptical.

And in terms of “free riders” and making things fair between business competitors – thanks, but no thanks. Right now, if employers wanted to, they could end the employer-sponsored health insurance programs that cover most Americans. If there was a competitive advantage to doing that, why haven’t they already? Because there are good business reasons to offer benefits – in fact, many businesses are competitive in part *because* they offer better benefits than their competitors, not in spite of them.

So considering the motivations for, and the negative consequences of these policies, I think including any of them would be a mistake. The House bill’s whopping eight percent payroll tax is probably the worst and would cost the country the most jobs (according to a model developed by the President’s Chair of the Council of Economic Advisors, it might kill 4.7 million jobs). The HELP Committee’s as-of-yet unreleased flat fee might hurt the economy a little less, depending on how high they set the tax. And the free-rider proposal being discussed would probably be the least harmful, although I doubt the thousands who lose their jobs because of it will offer much thanks to Congress for killing only some jobs.

The best option? Let market forces work. If employees need a certain level of health insurance to satisfy their obligation, employers will be increasingly likely to offer just such a plan.