Many part-timers are facing a double whammy from President Barack Obama’s Affordable Care Act.
The law requires large employers offering health insurance to include part-time employees working 30 hours a week or more. But rather than provide health care to more workers, a growing number of employers are cutting back employee hours instead.
The result: Not only will these workers earn less money, but they’ll also miss out on health insurance at work.
Consider the city of Long Beach, Calif. It is limiting most of its 1,600 part-time employees to fewer than 27 hours a week, on average. City officials say that without cutting payroll hours, new health benefits would cost up to $2 million more next year, and that extra expense would trigger layoffs and cutbacks in city services.
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Part-timer Tara Sievers, 43, understands why, but she still thinks it’s wrong.
“I understand there are costs to health care reform, but it is surely not the intent of the law for employees to lose hours,” said the outreach coordinator at the El Dorado Nature Center in Long Beach. “It’s ridiculous the city is skirting the law.”
Across the nation, hundreds of thousands of other hourly workers may also see smaller paychecks in the coming year because of this response to the federal health care law. The law exempts businesses with fewer than 50 full-time workers from this employer mandate.
But big restaurant chains, retailers and movie theaters are starting to trim employee hours. Even colleges are reducing courses for part-time professors to keep their hours down and avoid paying for their health premiums.
Overall, an estimated 2.3 million workers nationwide are at risk of losing hours as employers adjust to the new math of workplace benefits, according to research by the University of California-Berkeley. All this comes at a time when part-timers are being hired in greater numbers as U.S. employers look to keep payrolls lean.
The full effect of these changes in the workplace isn’t known yet because many employers are still considering what to do. Many companies waited to see whether the landmark legislation would survive a Supreme Court challenge and the outcome of last fall’s presidential election.
Now many employers are scrambling to understand the latest federal rules on implementation and are analyzing what makes the most sense for their workforce and for running their business.
There has been widespread speculation that many businesses would drop health coverage entirely in favor of paying a federal penalty of $2,000 per worker. Benefit consultants and insurance brokers say many companies examined that scenario. But they say most rejected it because of the disruption it would cause for employees and the potential for putting an employer at a competitive disadvantage in luring talented workers.
Instead, pruning the hours of part-timers has attracted far more interest.
“That will be a widespread strategy,” said Dede Kennedy-Simington, a Pasadena, Calif., insurance broker. “Employers will be making sure their payroll system can flag when part-time workers are getting close to the cap they set.”
Some supporters of the Affordable Care Act say they welcome a gradual shift away from employer-sponsored coverage if new government-run exchanges give consumers a choice of competitively priced health plans. Some low- and middle-income workers who qualify for federal subsidies may end up paying less by buying their own policy next year compared with their contribution toward employer coverage.
“If the exchanges work,” said Nelson Lichtenstein, a professor of history at the University of California-Santa Barbara and a labor expert, “then I’d be in favor of more people getting covered that way rather than through employers.”