To make the current health care reform proposals work there must be some form of an employer mandate to provide health insurance. If there is not one, companies would have a strong incentive to drop coverage knowing the government will help their employees get insurance.
The easiest, best, and simplest way to create an employer mandate is to charge companies a flat fee if they don't offer health insurance. The fee could be some percent of payroll or a set fine multiplied by the number of employees at the firm.
The Republicans don't want a simple employer mandate and instead are demanding it take the form an extremely complex and dysfunctional “free rider” provision. Senator Baucus has given in to their demands and is promoting a byzantine free rider provision. Instead of penalizing companies for not offering health insurance, it would only penalize companies for each employee they have that gets tax credits to help afford insurance on the new exchange. Not only would this idea be a bureaucratic nightmare to enforce, it would provide a powerful financial incentive to only hire people who don't get tax credits to buy individual insurance. This group includes spouses whose partners get good employer health insurance and, of course, illegal immigrants.
Baucus has made it clear that legislation is not going to allow undocumented workers to get tax credits to help afford health insurance. Since they can't get tax credits to buy insurance, employers who hire illegal immigrants won't face any penalty for not offering health insurance. The free rider provision championed by Republicans will provide another large financial incentive to hire illegal immigrants instead of American citizens.
After years of demagoguery from Republicans on the issue of illegal immigration, I'm left wondering: Why are Republicans (and Max Baucus) fighting so hard to encourage employers to hire illegal immigrants instead of working class Americans? The other important question is, of course, are Democrats so afraid of passing a bill without a few Republican votes that they would embrace such a clearly dangerous and stupid idea?
[Another Note: The Republican backed free rider provision would only penalize employers if their employees get tax credits on the exchange, but not if they are on Medicaid (according the the current framework). Medicaid would cover everyone making under 133% of the federal poverty level ($14,404 a year for individuals). Paying an employee one dollar more than $14,404 could increase the cost of employing them by thousands of dollars. The Republican/Baucus free rider provision not only encourages the hiring of illegal immigrants, but also encourages businesses not to pay Americans more than $14,404 a year.]
Updated - Breaking: Baucus' bill will now not let illegal immigrants buy health insurance on the new exchange even if they are willing to fully pay for it themselves. Not only is this a stupid and cruel policy but it is also very expensive. Illegal immigrants will be force to get very expansive emergency room care (which the government will end up playing for) since they are not allowed to buy health insurance.