James C. Capretta of Ethics and Public Policy Center has a great post on The Corner highlighting one of the many measures in the “economic stimulus” bill that have nothing to do with stimulus, but are major changes in policy. This one involves an important and potentially very costly employer healthcare mandate:
Now, the House has passed a provision-section 3002(b) of the stimulus bill-which would require employers to extend the period of COBRA eligibility beyond eighteen months for anyone with at least ten years of service with the firm or anyone who is at least 55 years old (this is in addition to a provision establishing a temporary federal subsidy at 65 percent of premium costs). These special categories of former employees could stay enrolled in a COBRA plan until they become eligible for Medicare at age 65. This would mean that a thirty-something displaced worker could potentially stay enrolled in a former employer’s health plan for three decades after separation.
The HR departments for large employers are looking at this provision with great alarm, as indicated in this policy brief. PricewaterhouseCoopers produced an analysis which pegs the ten-year cost of this provision at $39 billion to $65 billion just for those current COBRA-eligible workers age 55 to 64. The estimated costs would be even higher if the analysis assumed, as is reasonable, that many more workers would elect early retirement if they were assured of access to group-rated insurance.
What would employers do if faced with the costs of implementing this provision? It’s fairly predictable. They would hire fewer workers, and pay their current employees less. Not exactly “stimulus.”
Indeed, this is exactly the kind of complex provision which should be considered by Congress only after careful study and a hearing or two to avoid unintended consequences. Certainly it has no business on a bill purportedly aimed at promoting short-term job growth. Unfortunately, logic and reason may not be enough to prevail in the current mad-dash rush to “pass something.”