The unintended consequences of The Affordable Care Act (Obama Care): Layoffs, reduced work hours and dropped health care coverage
A condition of the Affordable Care Act contains a provision within the law known as the employer mandate. This stipulates that any employer that has more than 50 employees must provide health insurance to any employee that works a calculated average of 30 hours per week.
The contention surrounding the employer mandate has been a topic of discussion among economists, politicians and policy wonks alike. The employer mandate provision essentially provides an incentive among businesses to reduce worker hours below the threshold of 30 hours per week (or generate layoffs).
The White House has already moved forward to pushing the start date of the employer mandate to 2014 (a 1 year extension). Despite this, businesses have been reporting that they will be pursuing reduction in employees work hours per week and layoffs to offset associated cost increases in providing health insurance to employees.
This past week Indiana University has announced that it will lay off 50 maintenance and custodial workers and instead will shift those workers to a contractor that will manage the workers hours. The university has also stated that Graduate Students employed by the university will see their hours restricted below the 30 hour a week threshold to avoid having to supply them with health insurance coverage. The university currently spends $215 million on health care coverage.
Trader Joe’s became well known to do something that few retail businesses were doing at the time: Trader Joe’s began offering its part time employees health insurance coverage. This practice continued on for many years; however, according to a new leaked memo by the company’s CEO Dan Bane has outlined that Trader Joe’s will end their health insurance option for its part time employees (those that work below 30 hours). In exchange, Trader Joe’s will cut those employees affected a $500 check at the beginning of the year which they can use to purchase their own health care plan through the health care exchange networks established under the Affordable Care Act.
The rationale for Trader Joe’s to pursue this endeavor is about cost. The memo states that employees can, in addition to the $500 they will receive from Trader Joe’s also take part in other additional associated tax benefits outlined in the Affordable Care Act that can be used to purchase health insurance at no cost to the employee.
These are only two recent examples of businesses that are pursuing different operational models in relation to employee health care offerings. As of September 3rd, 258 business and organizations have been reported to cut hours and staffing levels as a result of the cost associated with the employer mandate.
While there are associated benefits of the Affordable Care Act, there is as well unfortunate and unintended consequences that arise as a result of provisions contained within the Affordable Care Act. One of those provisions is undoubtedly the employer mandate.
- White House Delays Affordable Care Act Employer Mandate Until 2015 (turbotax.intuit.com)
- Trader Joe’s Sends Part-Timers to Obama Health Exchanges (bloomberg.com)
- State-level unions line up behind AFL-CIO to oppose parts of Obamacare (watchdog.org)