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Employer Fair Share for Worker Health Care

Fact Sheet


Purpose

To require low-wage employers with 500 or more employees to pay their fair share of health care costs by imposing a penalty on large businesses that have workers enrolled in the taxpayer-funded Medi-Cal program. This bill closes a loophole in the Affordable Care Act that allows the lowest-wage employers to avoid penalties for not providing coverage to workers if the workers earn so little that they qualify for the state’s Medi-Cal program. The revenue from the fee will pay for the state share of Medi-Cal and improve access to health care by increasing the provider reimbursement rates.

 

Background

The Affordable Care Act is built on a foundation of individual, employer and government responsibility. Individuals must have health insurance or pay a penalty. The government provides subsidies and an expansion of Medicaid. Employers are required to provide affordable coverage or pay a penalty to offset the cost of public subsidies for their full-time employees who go into the state Exchange.

The ACA does not impose a penalty on employers, however, whose workers enroll in Medi-Cal. That means that employers who pay low-wages, reduce hours and fail to provide benefits are able to evade the ACA penalties. Essentially employers can shift the cost of health coverage for their employees onto taxpayers.

Some large low-wage corporations are already preparing for the ACA by cutting hours and eliminating benefits, since the penalty only applies to full-time employees. Darden Restaurants, which owns Olive Garden and Red Lobster and operates 121 restaurants in California, announced that it will reduce workers’ hours to part-time to avoid ACA penalties.

The lack of a penalty for part-timers or workers on Medi-Cal creates a perverse incentive for low-wage employers to cut hours, wages and benefits to the bare minimum to avoid ACA penalties, thus pushing more workers onto public programs like Medi-Cal.

Walmart, the largest private employer in the country, is preparing for the ACA by eliminating health benefits for newly hired employees who work fewer than 30 hours a week. This comes on the heels of a decision to eliminate benefits for those who work fewer than 24 hours a week.

The result is more Walmart employees ending up on public benefit programs, including Medi-Cal. A 2004 study by the UC Berkeley Labor Center found that Walmart workers’ reliance on public health care programs cost the state $32 million annually.

The state expansion of the Medi-Cal program allows large employers to shift even more of the costs of their employees’ health care onto the public. A childless adult could work 30 hours a week at $10 an hour and still qualify for Medi-Cal.

Given that the typical retail worker earns $9.61 an hour   and Walmart workers earn an average wage around $8.81 an hour , many of new Medi-Cal employees will be working for the largest employers in the state who can afford to pay for health coverage.

The expansion of Medi-Cal creates a new opportunity for Walmart, and other large employers, to continue the cost shift onto the public.

The consequences of this shift are serious. For one, Medi-Cal reimbursement rates to providers are already among the lowest in the country. A flood of millions of new enrollees onto the program could create a bottleneck in the system, causing long waits for necessary care and a shortage of doctors.  Taxpayers will also share in the cost of the program. Though the Medi-Cal expansion is 100 percent federally funded for the first three years, traditional enrollees have a 50 percent share with the federal government.

Fundamentally, Walmart is leading a charge to shirk the responsibility of employers that underpins the ACA. Our current health care system is built on shared responsibility and a strong employer-sponsored insurance system.

Taxpayers are holding up their end of the bargain. Large businesses like Walmart must do their part. A massive shift to publicly subsidized coverage by low-wage employers is unsustainable and threatens to drain state and federal budgets.

 

What This Bill Will Do

AB 880 (Gomez) will close a loophole in the Affordable Care Act that allows low-wage employers to evade their responsibility under the ACA to provide affordable coverage or pay a penalty for workers on subsidized coverage.  It will ensure that large employers pay their fair share into our public health care system, saving money for the General Fund and improving access to care for recipients.

Large employers will be subject to a fee if they have employees enrolled in the Medi-Cal program. The fee is equal to the cost of a commercial health plan that large employers provide to employees. The fee will be pro-rated for the number of hours worked by employees enrolled in Medi-Cal.

Revenues from the fee will be used to pay for the non-federal state share of the Medi-Cal program, to increase reimbursement rates for providers to care for Medi-Cal recipients and to shore up the state’s safety net.

The fee only applies to large private employers with more than 500 employees. Federal, state and local public employers are exempt from the fee.

Support

~  California Labor Federation (Co-Sponsor)
~  United Food and Commercial Workers (Co-Sponsor)
~  AFSCME
~  California Nurses Association
~  Health Access
~  California Immigrant Policy Center
~  Congress of California Seniors

Key Contacts

Sara Flocks, Sflocks@calaborfed.org
California Labor Federation
(916) 444-3676 ext. 20