If Gang of 8 bill passes, those newly legalized are exempted from Obamacare. HUGE incentive for employers to hire them instead of Americans.

— Senator Ted Cruz (@SenTedCruz) June 19, 2013

“If Gang of 8 bill passes, those newly legalized are exempted from Obamacare. HUGE incentive for employers to hire them instead of Americans.”

— tweet by Sen. Ted Cruz (R-Texas), June 19, 2013

This column has been updated

In the complex debate over the immigration bill, an odd dynamic is developing. The interaction of immigration law and health law means that a conservative senator who would ordinarily oppose letting a newly minted provisionally legal immigrant receive health-care benefits now cites that very fact as a flaw in the immigration bill.

Cruz’s tweet was retweeted more than a thousand times. But what’s going on here?


The Facts

The compromise immigration bill crafted by the bipartisan “Gang of Eight” known as S. 744 would exclude “registered provisional immigrants,” known as RPIs, from receiving federal subsidies intended, under Obamacare, to make health insurance more affordable. The RPIs would have a minimum 10-year wait, before they convert to legal permanent-resident status, before they could be able to qualify for the subsidies. 

Separately, under the health-care law, under what is known as the employee shared responsibility provision, some employers with too skimpy or unaffordable insurance coverage will likely have to pay a penalty of about $2,000 for each employee eligible for health-care exchange subsidies, excluding the first 30 employees. Catherine Frazier, a Cruz spokeswoman, says that because the RPI employee would not be eligible for a subsidy, the employer would not face the penalty, thus providing an incentive to be hired. She called this a “substantial incentive” for employers “to hire RPI immigrants rather than U.S. workers.”

“The Gang of 8 bill in conjunction with Obamacare creates de facto affirmative action for illegal immigrants. It’s reflective of how out of touch and broken Washington is, and how important it is that we defund and repeal Obamacare,” Frazier said.

This line of reasoning has been aggressively pushed by a writer for Investors Business Daily, which has labeled it a “$3,000 bonus to hire new immigrants.” (Update: IBD published a rebuttal, as has The Washington Examiner.)

Jenny Rejeske, health policy analyst at the National Immigration Law Center, says the issue is complex but “basically the employer penalty is only triggered if an employee receives a premium tax credit in the individual exchange. Since individuals who gain legal status through the bill (Registered Provisional Immigrants and blue card holders [agricultural workers]) are not eligible for the tax credits, they can’t trigger the penalty.” 

(Update: Oops, as some readers have pointed out, we misunderstood Rejeske’s point. She agrees no penalty would be triggered if an RPI was hired, but she said it is less of an issue for the reasons outlined below.)

Even so, Cruz is really creating a mountain out of a molehill. First of all, though there is a complicated formula for determining whether an employer is liable, every estimate we can find suggests the impact on employers is almost too minuscule to be noticed — only 0.2 percent (about 10,000 businesses out of 6 million) would be affected by the employee shared responsibility provision. That’s because it only affects companies that employ more than 50 people — and 96 percent of companies have less than 50 people.

Most companies that employ more than 50 people already offer health insurance — and the maximum penalty cannot be greater than if the employer did not offer coverage at all. The Congressional Budget Office estimates that about 1 million people, including immigrants, will receive an unaffordable offer from their employer, which amounts to 0.35 percent of insured Americans under the law. Meanwhile, there are 11 million people who potentially would be registered provisional immigrants. (Update: one reader, who said he works in the health insurance industry, notes that although the number might be small, the companies facing the fine are likely restaurants, hotels, landscaping companies, construction companies--the types of firms he said are most likely to hire RPIs.)

But more to the point, it is currently illegal for a potential employer to ask about a person’s immigration status when he or she applies for a job. An employer can only ask if an applicant is authorized to work in the United States. As the EEOC notes: “The Immigration Reform and Control Act of 1986 (IRCA) makes it illegal for employers to discriminate with respect to hiring, firing, or recruitment or referral for a fee, based on an individual's citizenship or immigration status.”

Documents concerning an employee’s immigration status can only be viewed after a person is hired. So maybe an employer will have a happy surprise after they decided to hire someone, but they can’t make it a hiring policy without crossing a legal line.

“There is nothing to prevent an employer from legally finding out one’s legal status during the application process,” Frazier said. She noted that some members of the Gang of 8 have expressed interest in fixing this perceived problem.

The Pinocchio Test

Cruz is off the mark here. He says there will be a “huge incentive.” But there is literally no incentive — unless Cruz expects companies to routinely break the law when looking for potential hires.

In any case, the pool of companies that could even, by coincidence, possibly take advantage of this quirk is too small to be even worthy of notice.

Cruz should have thought twice before he tweeted.

Update: The IBD rebuttal suggests that by “hire” Cruz was actually really saying “hire full time,” as companies might shift workers to less than 30-hour-work weeks in order to avoid Obamacare fines. IBD appears to be suggesting that companies would retain already-hired RPIs while shifting non-immigrants to part-time work. There are too many assumptions upon assumptions to make this scenario very credible. Moreover, we will note this argument was never made by Cruz’s office.

The key point is that Cruz claims there is a “huge incentive” for employers to in effect violate the law and there is little evidence to suggest that would be the case. Nevertheless, he doubled down on this claim on the Sean Hannity Show on June 24 by offering this interesting scenario: “I would be very curious if the columnist who wrote that who works for The Washington Post which has more employees how he would feel about it if they decided to fire him and hire someone who was here illegally because it was $5,000 more expensive to hire U.S. citizen to write that column.”

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