Target Drops Healthcare Coverage for Part-Time Workers, Claims No Reduction in Hours; Thank Your Employer?

Obamacare does not mandate healthcare coverage for part-time employees (defined as those working less than 30 hours a week). As a direct result, numerous retail stores including Trader Joe’s and Home Depot have already stopped offering healthcare plans to part-time workers.

Today, Target, the second-largest U.S. discount retailer by sales with about 361,000 total employees last fiscal year, joined the list. Effective April 1, Target to Drop Health Insurance for Part-Time Workers.

“You see a lot of retailers making adjustments in contemplation of the full effect of the employer mandate penalties in 2015,” Neil Trautwein, a lobbyist with the National Retail Federation, a trade group in Washington, said in a phone interview. “Even though it is not effective yet, it is already having an effect on the job market and putting companies where they would probably not otherwise want to be.”

“Health-care reform is transforming the benefits landscape and affecting how all employers, including Target, administer health benefits coverage,” Jodee Kozlak, Target’s executive vice president of human resources, said in yesterday’s web posting. She cited “new options available for our part-time team, and the historically low number of team members who elected to enroll in the part-time plan.”

No Target workers will see their hours cut as part of the change, she said. A Target spokeswoman, Jill Hornbacher, wouldn’t say how many part-time workers the company employs, saying in an e-mail that the number “fluctuates often.”

The Affordable Care Act created new government-run health insurance exchanges to sell coverage to uninsured people, often with premiums discounted by federal subsidies. It disqualifies Americans for subsidies at the exchanges if they have an offer of “affordable” coverage from their employers, defined as an insurance premium less than 9.5 percent of their income.

Target plans to pay $500 to part-timers losing coverage and a consulting firm will help those workers sign up for new Obamacare plans. It said on its website that many part-time workers may prefer coverage from the health law’s exchanges, and that by offering them insurance, “we could actually disqualify many of them from being eligible” for subsidies.

No Reduction in Hours?

Target claims there will be no reductions in hours worked. The only way I believe that is if Target already reduced hours, well in advance.

The huge, ongoing discrepancy between Household Survey employment, and the Establishment Survey jobs report suggests just that.

For example, over the last year, the household survey (on which unemployment is based), shows an average monthly gain in employment of 115,000 per month.

In contrast, the establishment survey jobs report shows an average gain of 182,000 jobs per month.

The difference is 67,000 per month.

Where are those jobs? I suggest two things happened as a direct result of Obamacare.

1. Employers reduced hours to get under the 30 hour definition of part-time
2. Employees responded by taking a second part-time job, thereby distorting the monthly job counts

For further discussion, please see Employment vs. Jobs Discrepancy - December 2013 Data.

Thank Your Employer?

If you are a part-time employee, Rick Newman writing for Yahoo!Finance says You May Want to Thank Your Employer.

Trader Joe’s is one employer known for offering generous health care benefits, even for part-timers (until now). But even those workers could end up better off under Obamacare. In an internal email published by the Washington Post, a Trader Joe’s exec provided some calculations for a part-time employee who earns about $24,000 per year and has been paying about $167 per month as her share of a Trader Joe’s policy similar to a “silver” plan under the ACA. If she enrolls in Obamacare, the subsidized cost would fall to about $70 per month for nearly identical coverage. And that’s before a $500 annual stipend Trader Joe’s plan to offer part-timers to help them pay for insurance.

Questions Abound

• Should part-timers also thank their employer for the reduction in hours they work so that companies could get under the 30-hour part-time limit? 
• Should those who have to subsidize others thank their employer as well? 
• Should the youngest age groups who were forced into the system against their will, and at high cost be grateful?

Before we blindly march down the "thank your employer" path proposed by Rick Newman, please recall that Obamacare did not solve any long-term problems in terms of reducing overall costs. All Obamacare did was create a different set of winners and losers with massive distortions on the job front, and insurance front, including incentivising companies to reduce worker hours.

Is everyone supposed to thank Obama for that?

Addendum:

Reader Charles commented (and I agree): The number one loser is the taxpayer, as federal subsidies for all involved will be much higher than estimates.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com