Employers react to health care reform law rule on definition of part-time employeeReprints
Reducing the maximum number of hours part-time employees work each week was the only decision the Lawrence County, Pa., Board of Commissioners felt they could make to avoid huge costs imposed by the health care reform law.
Sixty to 65 of the western Pennsylvania county's 400 employees, including correctional officers and 911 call center dispatchers, are part-time. Working up to 32 hours a week, they were not eligible for health insurance coverage offered to full-time employees.
Under the Patient Protection and Affordable Care Act, employers such as Lawrence County will be required to offer health insurance to employees working an average of 30 hours a week starting in 2015 or pay a penalty of $2,000 for each of their full-time employees.
Covering its part-time employees would have cost the county about $900,000 a year, said Dan Vogler, chairman of the county board. That would have required a boost in property taxes, which already were being increased 7% to balance the county's budget.
Raising property taxes even more is “not something the taxpayers of this county would have appreciated,” Mr. Vogler said.
To avoid the added costs and potential penalty for not offering coverage to workers considered full-time by the health care reform law, Lawrence County last year reduced the maximum hours that part-time employees can work each week to 28.
The city of Medina, Ohio, took a similar step.
Facing an estimated $1 million in new costs or a substantial penalty under the Patient Protection and Affordable Care Act, the Ohio city last year reduced its 35-hour workweek for part-timers to 29 hours.
Extending coverage to part-timers was “something we could not afford,” said Medina Mayor Dennis Hanwell. “We were reluctant to do this, but felt” we had no choice, he said.
Similarly, the University of Akron in Ohio, facing millions of dollars in additional costs while its overall budget had a projected deficit of $30 million, last year reduced the maximum hours for about 400 part-time workers from 32 hours a week to less than 30, a university spokesman said.
“Obviously, the looming budget deficit led to our decision to avoid the additional projected $4 million in costs associated with providing health care benefits to the part-time faculty,” the spokesman said.
Those employers have company in taking such steps to avoid higher costs or penalties due to PPACA. A Mercer L.L.C. survey of 723 employers released last week found that 10% expect to have fewer employees working at least 30 hours a week by 2015 to manage the number of employees eligible for coverage under the law.
Still, a majority of employers have not taken steps to reduce part-time workers' hours to less than the 30 the law considers to be full-time.
“This is very employer-specific. Some will have to compete for talent and will extend coverage. In other cases in labor-rich markets, employers may feel they can cut hours,” said Ed Fensholt, senior vice president and director of compliance services at Lockton Benefit Group in Kansas City, Mo.
Employers that have reduced part-time workweeks to avoid the 30-hour standard have gotten Congress' attention.
The House Ways and Means Committee last month approved legislation, H.R. 2575, that would change the definition of a full-time employee to one working an average of 40 hours a week.
Chief sponsor Rep. Todd Young, R-Ind., said prior to the Ways and Means Committee vote that the legislation would “restore the hours — and more importantly, protect the wages — of Americans who need them most.”
Observers say they expect the measure to be approved by the full House of Representatives, where Republicans are in control.
“We are quite optimistic that the bill will pass the House with a strong bipartisan majority,” said Neil Trautwein, a vice president at National Retail Federation in Washington.
The Democratic-controlled Senate is another matter.
“It looks like a very long shot in the Senate,” said Geoff Manville, a Mercer principal in Washington.
“It is unlikely that this proposal is headed for enactment,” said Gretchen Young, senior vice president for health policy with the ERISA Industry Committee in Washington.
Aside from the long-running congressional split, a recent Congressional Budget Office report offered another impediment. It estimated that changing the definition of a full-time employee to 40 hours a week would drop the number of people receiving employment-based coverage by 1 million, with 500,000 more people getting coverage—many with federal premium subsidies—through public health insurance exchanges, as well as other public programs, such as Medicaid.
The “net budgetary cost to the federal government” would be $73.7 billion for 2015 through 2024, the CBO said, much of that due to a reduction in health reform law mandated penalty payments by employers, as well as higher costs to the government since more individuals would be receiving federal premium subsidies to buy coverage in public exchanges.
Referring to the cost to the government of the Young bill, passage “is not something I see happening,” said James Klein, president of the American Benefits Council in Washington. “Democrats will say, "How will this be paid for?'”
“The revenue issue is a big obstacle,” said Drew Crouch, director of government relations in Washington for Buck Consultants L.L.C.
Still, Mr. Klein would not rule out a compromise, with some lawmakers working to come up with a new definition of a full-time employee.
“The odds of a compromise are not a complete zero,” Mr. Klein said, noting that some Democrats in the House and Senate already are in favor of such a change.