Corporate Fair Share for Worker Health Care
To ensure that the Health Benefit Exchange (HBEX) collects and makes available to policy makers and the public data that can be used to analyze what employers are shifting workers into subsidized coverage in the Exchange and at what cost to the public.
The Affordable Care Act (ACA) has three main goals: lower the skyrocketing cost of health care; guarantee choice of doctors and plans; and ensure quality affordable healthcare coverage.
Employers, individuals and government share the responsibility to achieve these goals. Individuals must purchase coverage, government offers premium subsidies and employers must provide coverage or pay a penalty. Penalties are intended to ensure businesses maintain adequate, affordable job-based coverage or pay their fair share for public coverage.
At the core of the Affordable Care Act (ACA) are state Exchanges. The Exchanges are marketplaces for individuals and small business to purchase health coverage and the only place to receive federally funded subsidies to cover the cost of health care premiums. In 2010, California became the first state to establish a Health Benefit Exchange (HBEX).
The availability of subsidized coverage in the Exchange reduces the incentive for some employers to offer coverage, depending on the demographics of the industry. Employer shifting of workers onto subsidized coverage in the Exchange undermines job-based coverage by allowing employers to get out of the responsibility to provide coverage. It also creates a drain on the Exchange which provides federally-funded subsidies.
Employer can evade their responsibility under the ACA because of the penalty structure. Penalties are only assessed if employers do not provide affordable health coverage and an employee receives subsidies in the state Exchange. The penalty is assessed per worker. However, penalties are only assessed on full-time, non-seasonal workers. The ACA defines full-time as an average of 30 hours or more in respect to any week and seasonal as working fewer than 120 days in a year
Nationally, 9.4 percent of the workforce work between 30-36 hours a week. The highest concentration of part-time and near part-time workers is in low-wage industries such as building services, retail and restaurants. That makes is easy for low-wage industries to reduce worker hours without substantially changing their business model.
The rise of contingent work could also help employers avoid ACA penalties. Employers in almost every sector are increasingly using contingent labor, such as temps and independent contractors, to cut costs and avoid providing benefits. Employers would have an added incentive to use contingent workers to avoid penalties for not providing health coverage.
Walmart is a good example of a company that’s already trying to game the system in order to avoid its responsibilities under the ACA. The big box retailer recently dropped health benefits for part-time workers. In 2014, the public will pay for subsidized coverage for Walmart’s workers, while the retailer avoids both the responsibility of providing coverage and paying the employer penalty.
Employer “dumping” of workers into the Exchange by dropping coverage and reducing hours is a challenge to maintaining job-based coverage, especially in low-wage industries. The availability of subsidized coverage in the Exchange reduces the incentive for some employers to offer coverage. The ability to evade penalties through cutting hours and using temps further reduces that incentive.
While certain employers will drop coverage, some Californians will be newly enrolled in job-based coverage. The individual mandate and automatic enrollment requirements will increase take-up. Some employers will start to offer coverage due to greater demand for coverage and new options to purchase in the small business SHOP Exchange.
All employers should pay their fair share to ensure the functioning of the health care system. State legislators and policymakers will need to closely monitor employer behavior after the Exchange opens in 2014 to make sure that the new agency is not adversely affected by employer dumping.
To ensure the success of federal health reform, individuals, employers and the government must share responsibility. Employers that attempt to shirk their responsibility erode the goals of the ACA to contain costs and increase the number of individuals with health coverage.
We will work with the Exchange to AB ensure that policy makers and the public have data on employer health coverage decisions when the Exchange opens in 2014. This data can then be used to analyze what employers are shifting workers into the Exchange at what cost to the public. Policy makers can use this analysis to make informed decisions about how to ensure both the success of the Exchange and the sustainability of job-based health coverage.
Sara Flocks, California Labor Federation (510) 332-1996