Obamacare: In 2014 Will Workers Be Able to Afford the Health Benefits Their Employers Offer?

Recently AP floated a story that spread like a virus. Within a day it was picked up by Yahoo! the Wall Street Cheat Sheet, and the Washington Post  where it was headlined “Affordability Glitch.”

Thanks to a “wrinkle” in the law, the story warns, Obamacare may hurt many of the people it is supposed to help, by making “health insurance unaffordable for . . . workers employed by restaurants, retail stores, hotels, and small businesses.”  The law is explicit, AP explains: “companies that employ 50 or more workers must offer ‘affordable’ coverage to those working more than 30 hours per week — or face fines. ‘Affordable’ health insurance, as defined by the legislation, means that premiums can cost no more than 9.5 percent of an employee’s income. . . .    . . . For low-wage workers, many of whom live paycheck to paycheck and earn barely enough to cover basic necessities 9.5% represents a lot of money.”  

True, but the fact that the law says premiums can equal 9.5% of income doesn’t means that employer-sponsored insurance will cost 9.5% of a worker’s pay.

Nevertheless, Yahoo! conjures up a hypothetical employee who will be left out in the cold: “Take, for example, a restaurant worker who makes $21,000 per year. A premium that costs 9.5 percent of this income would run $1,995 for the whole year, or $166.25 per month.  How could this employee possibly shell out nearly $2,000 a year for insurance?”  

He will have to turn down his employer’s offer, and then the government will demand that he pay a penalty because he didn’t buy insurance!
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Will Obamacare Kill Jobs? More Fictions and Facts

Fiction: No doubt, you’ve heard that Obamacare will cripple small businesses, the “engine of job growth in America.” In 2014 employers with more than more than 50 full-time workers will have to provide insurance—or pay penalties. If more than 30 of their workers go to the individual Exchanges and receive government subsidies in the form of tax-credits, the business will have to help cover those subsidies by paying a fine of $2000 to $3000 per employee.

Obamacare’s critics speculate that many employers will stop hiring, so that they have no more than 49 full-time employees.

–Fact: As of 2010, there were roughly 5.7 million small employers in the U.S. (defined as those with fewer than 500 workers.) Ninety-seven percent of them have fewer than 50 employees. In other wrods, Obamacare’s employer mandate applies to only 3% of small businesses.

And 99% of those  with more than 50 employees already offer insurance. The employer mandate will affect just a tiny sliver of small companies.  Lawmakers understood this when they wrote the legislation.

–Fiction: In 2014, many small employers will trim full-time workers’ hours and we will become a nation of part-time employees.  Small business owners know that if they have fewer than 50 full time workers (averaging 30 hours a week) they won’t have to pay a penalty, and their workers can go to the Exchanges where individuals can purchase their own insurance, and receive those generous tax credits.

–Fact: This bit of fear-mongering overlooks the fact then when the government counts “full-time employees” it doesn’t just count heads, it counts hours.The law says that the firm must offer insurance if it has 50 full-time “or full-time equivalent employees.”

Here is how the rule works: If a business has 50 full-time employees working 30 hours a week and cuts 10 back to 15 hours, it will have only 40 full-time employees. But it will have to hire more part-timers to cover holes in the weekly schedule.

Assume the company hires 20 new part-time employees, each working 15 hours a week. Because they will be putting in 300 hours a week the government will count them as ten “full-time equivalents.” Add those ten to the remaining 40 full-time workers, and the company then will have 50 full or “full-time equivalent’ -employees.

The business won’t have to insure the 20 part-timerswho work only 15 hours, but it will have to insure the 40 who work full-time—or pay the penalty..

This fiction also overlooks why employers offer benefits.   Research reveals that when a business insures workers, it enjoys higher productivity, better morale and lower absenteeism.

This explains why roughly 95% of companies with more than 30 employees provide health insurance.

 —Fiction: Chain restaurants, retailers and hotels can easily cut thousands of workers to part-time so that they don’t have to insure them.

— Fact:  Organizing a  company’s  hiring and staffing around making sure that it won’t have to offer health benefits is hardly a brilliant business plan

Imagine what cutting full-time workers’ hours will do to morale and productivity– not to mention customer service. 

 Consider this  Wal-Mart has stopped hiring full-time employees, and is relying on part-timers and temps. As a result, Forbes reports that Wal-Mart is experiencing  “complaints about understaffed stores with empty shelves and inventory piling up in warehouses and back rooms.”. 

“It seems even Wal-Mart can’t operate on such a lean staff,” writes Forbes contributor Laura Heller, who describes herself as “a retail geek/expert.”

“Dirty stores, parking lots in disarray and out-of stock products don’t bode well for sales and stores can’t operate that way for long periods.”

Meanwhile, Target, one of WalMart’s chief competitors, continues to offer health care benefits to part-time employees, even though the ACA doesn’t require that it insure them.
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