Obamacare Leads to More Part-Time Employees

Obamacare Leads to More Part-Time Employees
July 31, 2013

Loren Heal

Loren Heal (loren.heal@gmail.com) is a research programmer at the University of Illinois at Urbana-... (read full bio)

In order to avoid paying for insurance benefits mandated by President Obama’s health care law, employers are moving rapidly to shift their workforce to more part-time and temporary employees.

Employers are also finding other strategies to minimize their exposure to the law’s heavy regulatory burdens, according to Grace-Marie Turner, president of the Galen Institute.

“ObamaCare is the single biggest deterrent to job creation in our economy,” said Turner. “And it is hurting those at the lower end of the income scale the hardest. Young people can’t get a job to get their foot on the economic ladder. People with minimum wage jobs are being cut from fulltime to part-time to meet the law’s arbitrary definition of 30 hours as full-time work. And employers are seriously considering getting out of the business of providing health coverage altogether.”

Private and Public Sector Impact

John Goodman, president and CEO of the National Center for Policy Analysis, said this trend was spreading beyond the private sector.

“It’s more important than people realize, and it’s not just in the private sector. It’s in the public sector, as well. It’s in school districts, county governments, and others moving people to part-time work,” Goodman said. “The reason they’re doing it now is because in the law there’s going to be a 12-month look-back, starting January 1st, 2014, in deciding how many employees you have and deciding who’s full-time and who is part-time. That’s why it’s affecting the job market right this very moment.”

Goodman said anecdotal evidence and other reports indicate a widespread problem.

“There are news articles about what the county governments are doing, the school districts, local employers,” Goodman said. “It’s not a small thing. We’re talking about tens of thousands of workers. I’m convinced that one of the reasons why recovery has been so slow is Obamacare. Employers are reluctant to make part-time workers full-time workers because of the financial costs imposed by health reform.”

The IRS Is Watching

According to Goodman, creative methods for businesses to share employees cooperatively to avoid the law’s limits would probably draw attention from the Internal Revenue Service.

“That would be risky. The IRS has already said if you have two restaurants, those aren’t two businesses, those are one business,” Goodman said. “And it’s also said they’re going to count two part-time workers as one full-time equivalent. So they’ve already become pretty aggressive in how they’re going to interpret the law.”

Goodman said he expects a trend toward more contract and temporary labor supplanting full time employees.

“If you’re sophisticated about it, apparently you can even have the worker come and work part of the time at your office and still not count as an employee. But they’re going to do things like ask the employee to pay the most that they can ask the employee to pay and still count as ‘affordable’ under the law,” Goodman said.

‘The Sad Bottom Line’

Goodman uses the example of a hypothetical employee making $15 an hour, for a $30,000 annual income, in a state where family coverage costs $15,000 per year.

“The law says the premium can’t exceed 9.5% of the employee’s income, but that’s only for the individual coverage. They don’t have to contribute anything for the family coverage,” Goodman said. “So they ask the employee to pay just under $3,000 toward his own insurance, and all of the premium for the spouse and dependents, and it turns out that the employee’s paying $12,000.”

Goodman notes that the employee is not eligible for subsidies under the exchange if he’s offered affordable coverage, although any citizen can buy insurance at his state’s exchange.

“That’s the sad bottom line,” said Goodman. “Not only does the employee not get the insurance” from his job, “he doesn’t get the subsidy everybody else at the same income level is getting.”

Unanticipated Reactions

Jeffrey Anderson, director of the Benjamin Rush Society, said the hour cutbacks were another unanticipated reaction to Obama’s law.

“In their determined effort to overhaul American medicine against the clear wishes of the American people, President Obama and congressional Democrats apparently didn't even have enough foresight to anticipate that, if they compelled businesses to provide expensive insurance meeting federal approval for employees who work more than 30 hours a week, businesses might be savvy enough to react by cutting workers' hours to less than 30 hours a week,” Anderson said.

Many businesses are not looking for increased profits, but just to stay in operation. Steven Lozinsky, Vice President of Sparkle & Shine Cleaning Service, Inc. of Apex, North Carolina, which employs approximately 240 low-income workers, testified to the House Energy and Commerce Committee that he had three choices for his business. He could get all employees under 30 hours, try to downsize to around 100 employees and hope that he could afford the requisite fines, or close up shop entirely and lay off 240 people.

Anderson describes this problem as a result of the overarching philosophy of “government-by-coercion.”

“When the government aims to solve perceived problems by trying to force free citizens to do what the government thinks they should do, those people will look for legal loopholes,” Anderson said. “The result often leads to a solution that no one wants—in this case, workers getting fewer hours—in addition to less liberty for all.“ 

Internet Resources:

House Energy and Commerce Committee: Steven Lozinsky testimony to Congress.

http://docs.house.gov/meetings/IF/IF02/20130626/101045/HHRG-113-IF02-Wstate-LozinskyS-20130626.pdf

Loren Heal

Loren Heal (loren.heal@gmail.com) is a research programmer at the University of Illinois at Urbana-... (read full bio)