Local governments cutting hours over Obamacare costs

August 22, 2013

Many cash-strapped cities and counties facing the prospect of shelling out hundreds of thousands of dollars in new health-care costs under the Affordable Care Act are opting instead to reduce the number of hours their part-time employees work.

The decisions to cut employee hours come 16 months before employers — including state and local governments — will be required to offer health-care coverage to employees who work at least 30 hours a week. Some local officials said the cuts are happening now either because of labor contracts that must be negotiated in advance, or because the local governments worry that employees who work at least 30 hours in the months leading up to the January 2015 implementation date would need to be included in their health-care plans.

On Tuesday, Middletown Township, N.J. said it would reduce the hours of 25 part-time workers to avoid up to $775,000 in increased annual health-care costs. Earlier this month, Bee County, Tex., said it would limit its part-time workers to 24 hours per week when the new fiscal year starts Oct. 1.

Last month, department heads in Brevard County, Fla., were told to plan similar cuts in advance of the 2015 deadline. Brevard County Insurance Director Jerry Visco estimated the new mandate would cost the county $10,000 per part-time employee — or $1.38 million a year if all 138 part-time employees who work more than 30 hours a week are covered, he told Florida Today. The Brevard County libraries have already cut hours for 37 employees.

“It’s not something we prefer to do, but the cost of health insurance is significant and would really impact municipal budgets,” said Anthony Mercantante, Middletown’s township administrator. “It’s not something we can take on, particularly when we don’t know some of the other ramifications of the Affordable Care Act. There are far more questions than answers right now.”

Middletown spends about $9 million a year, out of its $65 million budget, on employee health policies, Mercantante said.

Elsewhere, Lynchburg, Va., administrators have cut hours for 35 to 40 part-time employees. Chesterfield County, just south of Richmond, is likely to cut the hours of “several hundred” employees, the county director of human resources told the Richmond Times-Dispatch earlier this year. Chippewa County, Wisc., will drop 15 part-time positions to avoid up to $163,000 in annual health care costs, the county administrator told Wisconsin Public Radio in April.

In a statement provided to GovBeat, White House Council of Economic Advisers chairman Jason Furman said there is no evidence that the Affordable Care Act is prompting employers to add part-time rather than full-time positions.

“Since the ACA became law, nearly 90% of the gain in employment has been in full-time positions.  Furthermore, the law is helping make health insurance coverage more affordable which supports job growth,” Furman said. “Just yesterday, we learned that the growth in employers’ health care premiums has slowed significantly recently, to less than a third of the growth rate in the late ’90s and early 2000s.”

Other supporters of the law suggested the cuts could actually cost counties and cities more money than if they simply paid for part-time workers’ health-care costs.

“There are some costs of doing business where it really does cost you more money to have multiple people on the job,” said Gary Burtless, a senior fellow of economic studies at the Brookings Institution. “Why would you create more jobs than you need to at 20 hours a week, when if you’re really responding to the Affordable Care Act you would assign people to work 29 hours a week?”

“I don’t think this is going to be a big direct-cost burden for counties and municipalities,” Burtless added.

Mercantante, the Middletown administrator, says it’s the uncertainty that’s driving his town’s actions. “Towns are going to have to start looking at different types of health-care packages to offer to people given the new mandates, but I can’t tell you what those are going to be or how much they’re going to cost us,” he said.

Reid Wilson covers state politics and policy for the Washington Post's GovBeat blog. He's a former editor in chief of The Hotline, the premier tip sheet on campaigns and elections, and he's a complete political junkie.
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Reid Wilson · August 22, 2013