Susan C. Morse (UC-Hastings), ObamaCare and Lower-Income Workers (Jotwell) (reviewing David Gamage (UC-Berkeley), Perverse Incentives Arising From the Tax Provisions of Healthcare Reform: Why Further Reforms Are Needed to Prevent Avoidable Costs to Low- and Moderate-Income Workers, 65 Tax L. Rev. 669 (2013)):
What if Obamacare changes the patterns of lower-income work? Murmurs in the news suggest that this is happening, for example through increased use of part-time schedules. In his forthcoming article, David Gamage explains the powerful incentives that the Affordable Care Act
(ACA) presents to employers to ensure that lower-income workers will be
insured through public exchanges rather than employer-provided health
insurance. These incentives to differentiate apply for a huge number of
employees, as they apply until households have income of between 2.25
and 3.5 times the poverty level.Gamage supports the ACA, but argues that it presents lower-income
workers and their employers with a catch-22. If employers provide
health insurance, workers will overpay for it. But if employers do not
provide health insurance, workers cannot access traditional
full-time-with-benefits jobs. …[H]e focuses on the question of how to rehabilitate the health insurance
market by removing the perverse incentive wedges created by the
combination of the ACA and the employer-provided health insurance
exclusion. He supports repeal of the income exclusion and enactment of
refundable tax credits commensurate with exchange subsidies. The
proposal would not eliminate higher marginal tax rates caused by the ACA
because of the phaseout of exchange subsidy benefits. But it would
leave employer-provided health insurance with only the non-tax
risk-pooling and intermediation advantages that Gamage observes at the
top of his paper. It would thus create a fair playing field, sans
perverse-incentive tax expenditures that favor one approach over the
other, for the government and employers to compete to be the most
efficient provider of health insurance.
