U.S. Markets closed

Immigration Reform Poses Jobs Question Under ObamaCare

A bipartisan group of senators on Monday offered up a path to immigration reform that seeks to sidestep one hurdle: The hefty cost that would result from several million illegal immigrants qualifying for ObamaCare subsidies upon becoming legal.

Under the proposal, illegal immigrants would remain in a probationary status for an indefinite period, immune from deportation but unable to access federal benefits such as ObamaCare.

That period would last until enforcement measures are deemed satisfactory and current green card applicants are admitted to the U.S., though an exception would be made for those who came to the country as children.

It's possible that this extra cost from ObamaCare subsidies could be postponed long enough to avoid sticker shock when government scorekeepers tally the 10-year cost of immigration reform. IBD previously estimated that ObamaCare subsidies for several million currently illegal immigrants could cost $10 billion a year by 2022.

Side Effect Either Way

Still, in avoiding one controversy, the Senate immigration reform plan could create another tied to ObamaCare's employer mandate.

Companies with at least 50 workers will face a penalty of up to $3,000 for each worker who receives subsidies via ObamaCare. If current illegal immigrants given probationary status are excluded from ObamaCare — and the fines that go with it — an employer may see that as an extra incentive to hire them instead of American citizens.

This is surely not the aim of the bipartisan group of senators, but it highlights the close link between immigration reform and ObamaCare.

Because the politics of each are controversial, the combination could turn out to be one of the biggest hurdles to President Obama's second-term goal of a path to citizenship for 11 million illegal immigrants.

The cost of immigration reform under the 2007 bill that died in the Senate would have been minimal — just $23 billion on benefits plus earned income and child tax credits over 10 years. Another $43 billion would have been spent on technology and staffing to implement the bill's enforcement measures.

Medicaid's Waiting Period

One key reason for the low cost is that benefits such as Medicaid aren't typically available until five years after immigrants gain legal status. ObamaCare is an exception, with benefits available immediately to all legal residents who earn up to 400% of the poverty level and don't have employer coverage.

Without that exception, the current employer mandate would have given employers an extra incentive to hire newly legal residents.

Americans Need Not Apply?

But the senators' bipartisan guest worker proposal could tilt that playing field against American workers if ObamaCare subsidies — and fines — aren't included.

The Senate blueprint states: "Our proposal will provide businesses with the ability to hire lower-skilled workers in a timely manner when Americans are unavailable or unwilling to fill those jobs.

Yet the amount businesses may be willing to pay American workers could be impacted by ObamaCare penalties.

But if immigration reforms make ObamaCare subsidies available to this new class of workers, that would further increase the overall cost of reform.

The 2007 Senate bill was projected to raise an additional $48 billion in revenue over 10 years due to economic gains from more legal immigration, leaving a net cost of about $18 billion.

A significantly higher cost might intensify the battle over spending and the future of ObamaCare, rather than derailing immigration reform.