Will Obamacare lead to millions more part-time workers? Companies are still deciding.

May 6, 2013

Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoon for the latest edition, and read previous columns here.

I spent this morning on C-SPAN's Washington Journal, taking viewer questions about how the health care law will affect businesses. Over the course of 45 minutes, the same question came up again: Will employers dodge the health law's requirement that they provide health insurance by switching to part-time employees?

"How's the health care law going to help them?" asked Richard, who called in from Brazil, Ind. He had read an article about the local school district looking at moving many of its employees to a part-time basis, assigning them less than 30 hours a week, so the district would not be required to provide health insurance benefits.

This isn't an issue specific to Indiana: From movie theater chains to state governments, there is a lot of debate over how large businesses will react to the requirement to provide insurance to full-time employees who work more than 30 hours a week.


Restaurant owners are weighing the benefit of skilled labor against the cost of providing health insurance. (Mark Finkenstaedt for The Washington Post)

The health care law requires companies with 50 or more employees to provide affordable insurance coverage to workers. For part-time employees, who work fewer than 30 hours, the story is different: A company does not get penalized for not providing health insurance coverage.

The motivation to move even more workers into part-time positions is relatively straightforward. Employers can dodge the requirement to purchase health benefits and not pay a fine to the federal government. All of a sudden, they're off the hook for an insurance policy that, on average, costs $9,562 to provide — and they don't have to pay a fine.

We haven't seen many employers move forward with such a change. A recent survey from the Federal Reserve Bank of Minneapolis found that 4 percent of companies it surveyed had moved to a larger, part-time workforce in response to the Affordable Care Act.

If part-time workers offer an easy way to dodge an expensive mandate, why haven't more employers jumped on board? I asked Christopher Ryan, a vice president of strategic services at ADP, to help explain. He spends a lot of time talking to companies about this issue and says it mostly boils down to a trade-off between having a skilled workforce and reducing benefit costs.

"If you’re operating a large restaurant in Manhattan on Valentine's Day, you're probably wanting to have a highly-trained, highly-skilled wait staff," he says. "And it's a question of, do you want your restaurant manager thinking about benefit costs, and who needs to be sent home at 8 p.m. [so they don't go over their 30-hour week], or do you want to think about providing consumers with a great experience?"

An employer can certainly save money by paying a worker for fewer hours and not covering health benefits. If a large employer moves to a larger part-time workforce, but still wants to stay staffed at the same level, that means more administrative work to take on additional workers.

In that case there would be a new roll for supervisors, too, who would likely need to manage their workers' hours more closely to ensure they don't go over the 30-hour threshold. That's not a function that supervisors in restaurants and retail typically provide right now, Ryan adds.

"If you restrict less than 30 hours, you’re going to have to hire additional part-time people," says Ryan. "There’s a cost of training associated with that that you also have to consider."

Ryan could predict there would be some companies— specialty retailers, for example—who find that, even when they pay benefit costs, they still come out ahead financially by having a skilled workforce of more highly-skilled salespeople.

"You could have a specialty retailer who thinks at the front end, we're going to limit everyone to less than 30 hours per week," he says. "If you do subsequent analysis, though, of cash register receipts based on tenure, you might start rethinking that."

Ryan continues, "If someone with 18 months experience may have three or four times the receipts of a less-experienced worker, do you want to focus on benefit cost? Or do you want to identify the high-performing employees and use benefits as a way to attract them."

For employers like this, moving workers to part-time status isn't just a way to cut benefit costs. It's a complicated decision, with benefits and drawbacks, and one that we're likely to hear a lot more about during the health law roll-out.

KLIFF NOTES: Top health policy reads from around the Web.

Employers want to overhaul the insurance mandate altogether. "Employers are putting increasing pressure on lawmakers to peel back a piece of the federal health-care law that requires firms provide insurance to employees working 30 hours a week or more. But such a change faces long odds on happening with only months before the requirement begins. Meanwhile, employers including cities, state agencies and charities have joined restaurants and retailers in paring workers' hours to avoid having to provide these workers insurance or pay a fee starting next year." Louise Radnofsky in the Wall Street Journal. 

The federal exchange's call center is expected to create 9,000 jobs. "The jobs are through Vangent, a General Dynamics subsidiary, which was awarded a $530 million one-year contract by the federal government to set up call centers to answer inquirers related to the insurance marketplaces in 34 states where they will be run in whole or part by the federal government. Other states will run their own marketplaces with their own call centers." Phil Galewitz in Kaiser Health News.

 

 

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