A Project of The Annenberg Public Policy Center

Does ACA Give Incentive to Hire Immigrants?

Q: Did Obama’s executive actions on immigration include a $3,000 bonus to employers for each immigrant they hire instead of U.S. citizens?

A: Not exactly. In very limited cases, employers may avoid the Affordable Care Act’s penalty if they hire immigrants who are not eligible for health care subsidies. But the law bars employers from discriminating against employees based on eligibility.


Is the following statement true? It is from Fox News.com/politics

Businesses reportedly will have a $3,000-per-employee incentive to hire illegal immigrants over native-born workers under President Obama’s sweeping action on illegal immigration.


This issue arises from a curious intersection between the Affordable Care Act and President Obama’s executive actions on immigration.

Under the ACA, employers may be required to pay penalties if their employees are eligible for tax credits to purchase health insurance through the law’s new marketplaces. But those who gain provisional legal status under Obama’s immigration plan are not eligible for health care subsidies — leading some Republicans and conservative media outlets to say this creates an incentive for employers to hire those with provisional legal status over U.S. citizens.

Health care experts say that could happen, but only in rare circumstances. And, according to a White House official, an employer who knowingly hires or fires employees based on their eligibility for health care tax credits could run afoul of discrimination provisions written into the law.

Two Scenarios

First, let us explain how this issue started.

Obama announced his immigration plan on Nov. 20. The plan provides a temporary relief of three years from the threat of deportation to parents who are in the country illegally but who have children who are U.S. citizens or lawful permanent residents. The parents must have lived in the United States for at least five years, and they must register, and pass background checks in order to obtain the reprieve. The White House estimates that 5 million people are eligible for “provisional unlawful presence waivers.” If they meet certain requirements, those immigrants also would be given work authorization for three years.

They would not, however, be eligible for federal tax credits to purchase insurance on the ACA-created health care exchanges. Nor would these immigrants be allowed to buy insurance through exchanges, even if they were paying for the insurance entirely on their own — as would have been permitted in the immigration bill that passed the Senate in 2013.

Some have argued this will encourage employers to hire those with provisional legal status over U.S. citizens in order to avoid an ACA penalty imposed on businesses that fail to provide insurance to their employees, or that offer plans that don’t meet the law’s minimum coverage requirements or are deemed unaffordable by the ACA’s definition. But, for a variety of reasons, this potential incentive would arise in only a fraction of employment situations.

To start, there is no “employer mandate” for companies with fewer than 50 full-time employees. In 2007, about 96 percent of companies — 5.8 million out of 6 million — had fewer than 50 employees. The vast majority of U.S. workers are employed at large companies, and about 96 percent of firms with 50 or more employees offer health insurance to their workers. Provided the insurance meets the ACA’s minimum standards and its definition of affordable coverage, those companies would not face ACA penalties, either. According to the White House, “less than 0.2 percent of all firms (about 10,000 out of 6 million) may face employer responsibility requirements.”

Nonetheless, that leaves thousands of mid- to large-size companies that could face penalties under two scenarios:

Scenario 1: Employers with 50 or more full-time workers in 2016 (and 100 or more in 2015) who do not offer health insurance benefits would have to pay a penalty if just one employee receives a health insurance tax credit. The penalty in 2016 is $2,000 per full-time worker (regardless of how many get tax credits), excluding the first 30 workers. Under this scenario, a company could avoid a penalty only if it hires an entire workforce comprised of people who do not qualify for tax credits. That would include immigrants with provisional legal status, but also those on Medicare or highly-compensated employees who do not qualify for federal tax credits or cost-sharing subsidies.

Health experts say such a scenario would be highly unlikely. The full penalty is triggered whether one worker, or all of them, gets a tax credit. And if the penalty formula kicks in, companies would pay $2,000 more per full-time employee regardless of the immigration status of any particular employee.

Scenario 2: Employers with 50 or more full-time workers in 2016 (and 100 or more in 2015) also could incur penalties if they do offer insurance but that insurance does not meet the minimum coverage thresholds required by the ACA, or if the employer-sponsored plan is deemed unaffordable for some employees (more than 9.5 percent of family income). In either case, the employer could be subject to a $3,000 penalty for each employee that enrolls in a qualified health plan and qualifies for tax credits or subsidies. Given the mention of a $3,000 penalty, it appears those warning about the immigrant-vs.-citizen loophole are referring to this scenario.

It is conceivable under this second scenario that an employer would benefit if an employee was not eligible for a tax credit or cost-sharing subsidy, because they would be sure to avoid a potential tax penalty.

If only a few qualify for government assistance, it could be worth hiring such immigrants, said Margaret Riley, a health law professor at the University of Virginia.

“But you’re also a less attractive employer because you’re offering expensive or substandard insurance while still incurring costs for offering insurance,” Riley wrote to us in an email. “It looks to me like you’d be spending a lot of time trying to get the math exactly right. And it starts looking like you’re manipulating things. If you decide to offer substandard insurance and start hiring newly permitted illegal immigrants … you may well get caught in a discrimination scheme. There may be incentives for a couple of hires, but one has to assume that there are other business considerations that should also be in play. I’m not sure that saving money is the motivation if it goes beyond that.”

Anti-Discrimination Provision of the ACA

Angel Padilla, a health policy analyst at the National Immigration Law Center, which supports the president’s actions, told us that an employer who would like to create a scenario to take advantage of the perceived loophole would violate various anti-discrimination laws.

The White House points specifically to discrimination provisions written into the ACA that it says prohibit employers from giving preference to job-seekers who don’t qualify for health care tax credits, or to fire U.S. citizens because they receive tax credits and then hire those immigrants who are not eligible.

Here’s the applicable portion of the Affordable Care Act:


The Fair Labor Standards Act of 1938 is amended by inserting after section 18B (as added by section 1512) the following:


‘‘(a) PROHIBITION.—No employer shall discharge or in any manner discriminate against any employee with respect to his or her compensation, terms, conditions, or other privileges of employment because the employee (or an individual acting at the request of the employee) has—

‘(1) received a credit under section 36B of the Internal Revenue Code of 1986 or a subsidy under section 1402 of this Act;

… An employee who believes that he or she has been discharged or otherwise discriminated against by any employer in violation of this section may seek relief in accordance with the procedures, notifications, burdens of proof, remedies, and statutes of limitation set forth in section 2087(b) of title 15, United States Code.

Employees who feel they have been discriminated against based on eligibility for health care tax credits could file a complaint with the Secretary of Labor. If a case is deemed to have merit, the employee would be reinstated to their former position, with back pay, and might be eligible for compensatory damages as well.

In addition, Padilla said, the Immigration and Nationality Act’s anti-discrimination provision would prohibit an employer from inquiring about a person’s particular immigration status or employment authorization documents prior to hire.

He also said, “It would likely violate the INA’s prohibition on discrimination based on citizenship status for an employer to prefer job candidates who would be ineligible for ACA coverage — since that would likely discriminate against citizens, LPR [Lawful Permanent Resident], and other types of non-DACA work authorized workers.” DACA refers to the Deferred Action for Childhood Arrivals program that has been in effect since 2012 and was expanded by the president’s new immigration plan.

Timothy Jost, a health law professor at Washington and Lee University, told us the health care law clearly prohibits an employer from firing someone based on whether he or she applies for a health care tax credit. But he said it would be harder to make a case using that law against an employer who gives hiring preference to someone who is ineligible for a tax credit.

Riley agreed, but said the gyrations that a company would have to go through to take advantage of the loophole might expose it to scrutiny.

“Discrimination in any context is notoriously hard to prove,” Riley said. “But here, it would be pretty difficult to create the perfect scenario where everything holds together. So that may look suspicious. And for most companies, I doubt that newly permitted illegal immigrants are necessarily better employment candidates than citizens. So a course of conduct of hiring the former to the exclusion of that latter would certainly raise questions.”

Ultimately, Jost believes a bigger disincentive for employers would simply be market forces.

“If you are trying to hire competent employees who are going to do a good job, that [taking advantage of such a loophole] is not going to attract employees to your business,” Jost said.

“This is kind of a bugaboo out there,” he said, “because it’s only going to affect a tiny percentage of employees.”

— Robert Farley


Dinan, Stephen. “Obamacare offers firms $3,000 incentive to hire illegals over native-born workers.” Washington Times. 25 Nov 2014.

WhiteHouse.gov. “FACT SHEET: Immigration Accountability Executive Action.” 20 Nov 2014.

Government Printing Office. S. 744. Border Security, Economic Opportunity, and Immigration Modernization Act.

WhiteHouse.gov. “The Affordable Care Ac Increases Choice and Saving Money for Small Businesses.”

Kaiser Family Foundation. Employer Responsibility Under the Affordable Care Act. Updated 24 Nov 2014.

Eilperin, Julie and Goldstein, Amy. “White House delays health insurance mandate for medium-size employers until 2016.” Washington Post. 10 Feb 2014.

Bianchi, Alden. “A Primer on ‘Low-Cost’ Group Health Plans.” Mintz Levin. 18 Jun 2013.

15 U.S. Code § 2087