How Expanding Paid Sick Leave Could Backfire

Source: LifeHealthPro

A health care economist says expanding the health savings account (HSA) program would be a better way to help workers deal with sick days than establishing a new paid-sick-day mandate.

Devon Herrick, an analyst at the National Center for Health Policy Analysis (NCPA), makes that argument in a commentary on the Obama administration’s new paid-sick-leave initiative.

President Obama has been encouraging states and cities to help move the country toward having employers offer at least seven paid sick days. Obama talked about the proposal Tuesday during his State of the Union address.

Herrick says setting a sick-day mandate could backfire, by prompting employers of low-wage workers to compensate for the effects of the mandate by cutting wages or cutting other compensation costs. In some cases, Herrick says, an employer might cope with need to add paid sick days by subtracting paid vacation days.

A better approach would be to let workers who contribute to HSAs draw cash from the HSAs to compensate for pay lost due to sickness, Herrick says.

Today, workers who use funds in their HSAs to replace lost income must pay a penalty of 20 percent on top of ordinary income taxes, Herrick says.