Employers, low-wage workers stand to gain from termination of health coverage
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While terminating health care plan coverage could end up costing employers more — not less — than continuing their plans, benefit experts say there is one big exception: employers whose workforces are overwhelmingly made up of low-wage employees.
Those employees would be eligible for rich federal premium subsidies, which would reduce and in some cases eliminate the need for employers to increase those employees' salaries to offset premiums they would pay for coverage in public exchanges.
Indeed, Target Corp., which announced last month it will eliminate coverage it provides to part-time employees on April 1, said workers could end up paying more if it continued to offer coverage.
“We could actually disqualify many of them from being eligible for newly available subsidies that could reduce their overall health insurance expense,” the third-largest U.S. retailer said. Currently, just 10% of part-time employees — those working as few as 20 hours a week — enroll in health care plans Target offers. “Health care reform is transforming the benefits landscape and affecting how all employers, including Target, administer health benefits coverage,” Jodee Kozlak, Target's executive vice president of human resources, said in a statement.
An example illustrates how the health care reform law will minimize, and in some cases eliminate, premiums paid by low-wage employees who obtain coverage through public exchanges. In the case of a part-time employee earning $12 an hour and working an average of 25 hours a week, with annual income of $15,600, that individual would be eligible for a federal premium subsidy that would completely cover the cost of a bronze-level plan offered through a public exchange, and would have to pay a premium of just under $500 for a somewhat richer silver-level plan, according to a Kaiser Family Foundation subsidy calculator.
Target said it will give part-time employees now insured $500 cash.
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