Many part-time workers are facing what is being called 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.
The city of Long Beach, Calif., 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 services.
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. Colleges are reducing courses for part-time professors to keep their hours down.
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.
One consolation for part-timers is that many of them stand to benefit the most from the health-care law’s federal premium subsidies or an expansion of Medicaid, both starting in January.
The law will require most Americans to buy health insurance or pay a penalty. Yet many lower-income people will qualify for government insurance or be eligible for discounted premiums on private policies.
“For people losing a few hours each week, that’s lost income, and it has a real impact,” said Ken Jacobs, chairman of the UC-Berkeley Center for Labor Research and Education. “But many low-wage, part-time workers will also have some affordable options under the federal law.”
Employers say these cutbacks are necessary given the high cost of providing benefits. Bill Dombrowski, chief executive of the California Retailers Association, said employers are reducing hours because “it’s the only way to survive economically.”
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. But benefit consultants and insurance brokers 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.
Virginia’s Republican governor, Bob McDonnell, announced this year that all part-time state employees should work 29 hours or less to avert the 30-hour threshold. Darden Restaurants Inc., which owns the Olive Garden and Red Lobster chains, began shifting to more part-time workers last fall in a much-publicized test to keep a lid on health care costs. Then Darden dropped the plan after being roundly criticized.
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.”