Target’s recent move to discontinue health coverage for its part-time workers and encourage them to sign up for coverage through the Obamacare exchanges is the latest in a series of high-profile corporate decisions that have sparked headlines and political debate. Joining companies like Home Depot, Trader Joe’s, and UPS, Target’s decision highlights how businesses are recalibrating their health care offerings in response to the Affordable Care Act (ACA). While these shifts often carry political baggage, they also raise important questions about the real-world impact of Obamacare on employees and employers alike.
Target’s move is part of a larger trend in which employers are reassessing their health benefits in light of the ACA. With the employer mandate set to take effect in 2015—requiring companies with 50 or more full-time employees to offer health coverage or face fines—businesses are still trying to figure out their strategies. While some, like Starbucks, have pledged to continue offering health benefits to part-time workers, many are considering shifting part-time employees to the ACA exchanges instead, especially in industries like retail and hospitality, where part-time work is prevalent.
Companies are weighing whether offering health insurance to part-time employees is still the best option, considering the ACA’s subsidies and coverage through the exchanges. However, for every company that shifts its workers to the exchanges, there’s another potentially negative headline associating Obamacare with a reduction in coverage, a narrative that critics of the law have eagerly embraced.
Scott DeFife, lobbyist for the National Restaurant Association, explains, “It’s starting to shake out a little more what the options are going to be. It may be that you can protect other benefits better by sending the part-time workers to the exchanges.”
The corporate response to the ACA is far from uniform. Industry experts predict that decisions about offering coverage or shifting employees to the exchanges will be influenced by multiple factors, including geography, competitive pressures, and the workforce companies want to attract. Neil Trautwein of the National Retail Federation notes, “I don’t see a wholesale movement in any direction, and I strongly suspect this is not the last shoe to drop.”
In some cases, like that of UPS, companies that initially blamed Obamacare for reducing benefits have walked back their decisions, citing broader health care cost concerns. Similarly, Papa John’s CEO John Schnatter drew criticism when he suggested that Obamacare would raise pizza prices, a claim that added fuel to the debate over how the law impacts businesses.
Target’s approach, however, shines a light on the broader issue of part-time workers. Despite being a large employer, only a small percentage of Target’s part-time workers were enrolled in company-provided health coverage, and the company argues that workers could be better off on the exchanges, where subsidies may make coverage more affordable.
Part-time workers have long faced challenges in accessing employer-sponsored health care. According to a survey by the Kaiser Family Foundation, only 25 percent of businesses that offer health coverage extend it to part-time workers. For those working fewer than 30 hours a week—Target’s focus group—only 3.5 percent received workplace health insurance in 2012.
Many part-time employees already receive coverage through other means, such as through a spouse or parent. Target’s decision also illustrates how some part-time workers might benefit from Obamacare’s subsidies, which they wouldn’t be eligible for if their employer provided coverage. Steve Wojcik of the National Business Group on Health highlights, “In some cases, the employees might be better off with Obamacare than with the company’s health insurance.”
Yet, not all workers will be pleased by the change. The abrupt end to Target’s part-time health coverage on April 1st leaves many employees scrambling to sign up for new plans before a coverage gap occurs. Republicans, especially, are capitalizing on such situations, claiming that Obamacare is pushing businesses to cut workers’ hours or shift costs onto employees.
While the headlines focus on big names like Target, businesses are still carefully evaluating their options. A survey by Towers Watson found that 12 percent of firms offering health benefits to part-time workers were considering dropping them by 2015. However, just 3 percent of businesses said they would follow Target’s model of offering a subsidy to help employees purchase coverage on the exchanges.
Experts say that while some companies might eventually shift their workers to the exchanges as the ACA’s enrollment process becomes smoother, others will continue offering coverage or make alternative decisions based on their unique circumstances. Jim Klein of the American Benefits Council emphasizes that companies are taking a wait-and-see approach, eager to ensure that the exchanges are reliable before making any permanent changes.
“The result of this is going to be that there are some employers who will now provide coverage who before weren’t, and there will be others who will cease providing coverage and allow their employees to get coverage through the exchanges,” says Klein.
Ultimately, companies are taking a cautious stance as they navigate the complexities of the ACA. Although more businesses might decide to reduce or drop coverage for part-time employees, there is no clear trend emerging, and many employers are hesitant to make significant shifts without knowing how the exchanges will perform over time.
As the ACA rollout continues to evolve, so too will the strategies of companies grappling with the law’s impact. And while not every decision will make headlines, the fallout from these early corporate moves will shape the debate over the future of health care in America.
