Large employers, specifically government agencies, educational institutions, corporations and nonprofits with 50 or more employees, are grappling with provisions of the Affordable Care Act that are set to go into effect on Jan. 1, 2014.
Under mandates of President Barack Obama’s landmark healthcare reform law that aims to increase coverage and reduce overall healthcare costs, such employers generally have three basic options: cover health-insurance costs for workers on the clock for 30 hours or more per week; pay steep penalties for not doing so; or neither.
The latter option includes simply cutting part-time workers’ hours enough to bypass paying any penalties or new health-insurance costs at all. It’s a loophole that some employers are willing to explore.
For instance, national media outlets recently reported that the City of Long Beach is at least looking at whether to cut part-time workers’ hours to avoid new costs of the law.
According to a statement provided via email by Tom Modica, the City’s director of Government Affairs, out of Long Beach’s 5,657-employee total workforce, 1,593 employees work part time. About 92 percent of those part-time workers are seasonal/temporary employees, such as lifeguards, library staff, recreational staff and supplemental refuse workers, who work on an “as-needed basis.”
Still, approximately 200 part-time employees (3.5 percent of the City’s total workforce), according to historical data, fall into the category of working 30 hours or more per week and “may be affected by the implementation of the law.” Those 200 employees may either be enrolled in the City’s healthcare program or have their hours cut, “depending on staffing needs,” according to the statement.
Long Beach city management estimates that enrolling all of the 200 employees in its healthcare program would cost the City an additional $2 million per year, resulting in “layoffs of part-time staff to realign the program with the resources available.”
Rather than enroll in the City’s healthcare system, which is the California Public Employees Retirement System (CalPERS), however, it may be more beneficial for many part-time employees to access the “Health Insurance Exchange,” also known as the “Marketplace,” which offers a “one-stop shop” for people to buy health insurance from a multitude of private healthcare providers and apply for federal subsidies.
Violating provisions of the law, however, carries financial consequences, including a maximum annual penalty of $2,000 for every full-time employee. For large employers, such as Long Beach, the penalty for not covering eligible part-time workers could add up to millions of dollars per year.
Modica added that the City is “engaged in the process right now of examining the potential impacts through the budget process.” In coming months, the Long Beach City Council will discuss the Fiscal Year 2014 budget, which is to be adopted by September.
For the past several years, however, Long Beach, like many cities, has been dealing with structural deficits. Just last year, the City had to close a nearly $17-million budget gap, a process that included slashing city services, consolidating police stations, implementing layoffs through attrition and other cost-cutting measures.
Though major pension-reform agreements among the City’s largest labor unions have helped reduce labor costs while oil revenue has helped pay for one-time expenses, the City remains in a precarious spot for added expenses.
For some smaller cities, however, the new law isn’t as financially burdensome.
For instance, the City of Signal Hill, which has a total workforce of about 125 employees (about 30 part-time employees and 95 full-time employees), will hardly be affected, according to city staff. “The bottom line is we don’t have a lot of part-time employees,” said City Manager Ken Farfsing.
Mary Gilmore, assistant to the city manager/personnel, said Signal Hill does have four community-services employees who would normally be required to receive benefits under the law since they work more than 30 hours per week.
Those four employees, however, are exempt from the requirements, she said, since the Affordable Care Act allows 5 percent of an employer’s full-time-equivalent workforce to be uncovered (requiring 95 percent of an employer’s full-time workforce to be covered).
Still, the City isn’t entirely off the hook. Gilmore said if one of those four employees decides to enroll in the Exchange, the City would be assessed a penalty of $3,000 per year for each full-time employee receiving a premium credit.
Additionally, Signal Hill city management has made a point to not add any more staff above the 30-hours-per-week threshold, she said. “We’re just not going to add more people to that list,” Gilmore said.
But, Long Beach is not unique in considering whether to cut part-time workers’ hours.
In fact, results of a study released in February by the UC Berkeley Labor Center show that 2.3 million workers nationwide (1.8 percent of the United States workforce) are at risk of work-hour reduction because of provisions of the Affordable Care Act.
Workers with the highest risk of having hours cut are in industries such as retail, restaurants, professional services, education and health care, according to the study. The study adds that those workers with the highest risk for work-hour reductions work 30 to 36 hours per week, have incomes that are 400 percent below the federal poverty line and do not receive insurance through their own employer.
Long Beach Unified School District (LBUSD), which is the largest employer in Long Beach with a total workforce of about 12,000 employees, is also determining the financial implications of the new law.
Chris Eftychiou, spokesperson for LBUSD, said about 5,500 employees at the school district work full-time and about 6,500 employees work part-time.
Currently, approximately 6,200 employees are “eligible for benefits,” he said, adding that the school district is “conducting an analysis of hours worked for part-time, substitute and temporary employees to determine the impact of the Affordable Care Act.”