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Gauging Impact of Health Law on Part-Time Work No Simple Matter

By John Reichard, CQ HealthBeat Editor

June 5, 2013 -- Will the health law trap a growing number of workers in part-time jobs as employers scramble to avoid higher health insurance costs under the overhaul? And to avoid a penalty, will those workers increasingly have to get federally subsidized coverage from insurance exchanges to comply with the law's insurance mandate that starts next year?

And if such workers do have to rely on those subsidies, will taxpayers get stuck with the tab for higher subsidy payouts, casting further doubt on the Congressional Budget Office estimate that the health law won't add to the federal deficit over the next decade?

There's been no shortage of news reports and predictions by opponents of the law suggesting that those ill effects will be part of the fallout of a law CBO estimates will bring coverage to about 25 million uninsured Americans by the start of the next decade.

But predicting the extent to which such changes will occur and can be attributed to the health law (PL 111-148, PL 111-152) is no simple matter.

For example, employers who have warned that they will switch large numbers of workers to part time haven't necessarily made the final decision to do so. Also, there already is a labor force trend underway to more part time work, making it difficult to tease out whether, and how much, the law is adding to that.

And, Washington being Washington, opponents of the law may be exaggerating its ill effects in order to weaken public support for the overhaul and boost their prospects in the 2014 congressional elections.

Still, it's probably wishful thinking on the part of supporters of the law to brush off reports of a shift to part-time work as merely anecdotal. But some analysts still predict that to the extent it does occur, it may not happen on a large scale.

Under the law, starting in 2014, employers with 50 or more full-time workers will have to offer health coverage to those employees or pay a penalty. But the law does not require health coverage for part-time workers, defined as those who work fewer than 30 hours a week.

In recent weeks there have been reports of workers in a variety of occupations being limited to part-time work because of the law—from Head Start employees to adjunct professors to fast food workers to substitute teachers.

The overhaul is leading to part-time work for hundreds of thousands of Americans, Senate Republican leaders told reporters last month.
"We see across the country, municipalities, we see universities and businesses all cutting back on their workforce to get them below 30 hours, to the point that the University of California at Berkeley has said there are about 2.3 million individuals around the country who will be in this situation," Sen. John Barrasso, R-Wyo., said after the May 7 GOP policy lunch.

Senate Minority Leader Mitch McConnell recounted his meeting earlier that day with a Kentucky businessman. "He owns a number of retail operations. And what he's going to have to do is reduce the number of employees that he has as full-timers down to part-timers in order to deal with the impact of this law," McConnell, R-Ky., added. "I picked up a lot of anecdotes ... about that kind of reaction and other kinds of reactions, all of which add up to fewer jobs or more part-time jobs. In fact, I think there's something like 280,000 additional part-time jobs the last month as a result of this law."

Workers in some retail outlets suspect they are being limited to fewer hours because of the health law.

Duane Davis told NPR on April 29 that his employer, Juicy Couture, said he couldn't work more than 23 hours per week. Davis said he suspected his hours were being limited because of the health law, something the company denied. Chains such as Papa John's and Darden Restaurants, which owns Red Lobster and the Olive Garden, said they may reduce workers' hours, according to the same NPR report.

Colleges increasingly are slashing the hours of adjunct professors to avoid triggering the health coverage requirement for full-time workers, The Chronicle of Higher Education reported April 22.

And on June 1, the News & Observer in North Carolina reported that the Wake County school system is considering restricting its 3,300 plus substitute teachers to working fewer than 30 hours per week, starting July 1.

Effects Hard to Judge

But multiple factors go into the decision whether to employ workers part time or full time, analysts say. And fear and anxiety about the law and ignorance about what it actually does may be contributing to exaggerated predictions about its impact.

Neil Trautwein of the National Retail Federation says that the health law is just one of a number of factors employers take into account in deciding whether or not employees should work full or part time. "I think the ACA and 30-hour rule for full-time will lead to a more conscious view of who is full-time (and eligible) and who is not," Trautwein said in an email message. "It's still too early to see definitive directions on full versus part-time—the operative consideration isn't into effect, yet," he said.

Paul Fronstin of the Employee Benefits Research Institute notes in a recent report that the part-timer trend already was well underway.
"The recent recession has already resulted in an increased use of part-time workers," Fronstin said. The percentage of workers employed part-time has been rising since 2007, increasing from 16.7 percent in that year to 22.2 percent in 2011, he said.

Almost all employers with 50 or more full-time workers offer health coverage, Fronstin noted. But there are other provisions of the health care law "that are expected to increase the cost of coverage," his report says. "As a result, there is concern that employers may respond by cutting back on health coverage for part-time workers or by increasing the proportion of part-time workers employed," it adds.

In 2011, 59.6 percent of full-time workers had coverage from their jobs, while 15.7 percent of part-time employees had health benefits. "Both have been trending downward since 2007," the report said. "However, in relative terms, part-time workers have experienced a much larger decline in coverage than full-time workers. Between 2007 and 2011, full-time workers experienced a 2.8 percent reduction in the likelihood of having coverage from their own jobs, while part-time workers experienced a 15.7 percent decline."

These trends form a baseline against which changes following the health law must be measured, Fronstin cautioned.

Some See Limited Impact

Urban Institute analyst Linda Blumberg says it's premature to assess what the impact of the health law on part-time employment. She adds that the law is a tempting scapegoat for decisions to switch to part-time work that would have been made anyway. Employers who are switching to more part-time work because of the law are likely to do so toward the end of the year, not now, she adds.

Blumberg does think the law will limit working hours in some cases. But the effect won't be large, she predicts. And she doubts the trend will add substantially to the federal subsidies. For one thing, a part-time worker wouldn't qualify for a subsidy if a spouse is offered coverage by his or her employer, she noted.

Small employers have expressed alarm about the health law, but Blumberg notes that they are not affected because employers with fewer than 50 workers don't have to provide coverage. And she suggested that the effect will be limited among larger employers already offering coverage who might want to switch more workers to part time because the law subjects them to higher costs.

Blumberg said the real impact is most likely to occur among employees who now work 30 to 35 hours per week and whose employers do not now offer health coverage. Those employers have a variety of tools to deal with the higher costs they face under the health law, she says. They can pay the penalty, something she calls "wasteful," or they can cut a worker's hours or they can "offer the coverage and trade off the growth in wages that that worker would have otherwise," she said.

"So do I think that some workers will end up with a small amount fewer hours per week in a typical week of work? Yes, I think that's going to happen in some cases," she said. "But I don't think it's going to be a huge phenomenon" because of the costs associated with doing that, such as the administrative and management hassles of having more part-time workers to manage and the greater turnover involved.

Blumberg also noted that some employers who say they are going to switch to part time may not do so because of the reaction from their employees and from the public. She noted, for example, that Darden backed off a plan to shift full time workers at Olive Garden and Red Lobster to part-time status following a negative public reaction to the move.

Berkeley Study

Barrasso's reference to 2.3 million workers comes from a February study by the University of California Berkeley Labor Center. It examined industries with a high percentage of employees working fewer than or slightly above 30 hours per week, placing them at risk for reduced hours by an employer wishing to avoid penalties.

It found that 2.3 million workers were most vulnerable to work hour reduction. That's because their employers do not now offer them health coverage and would have to do so under the health law, and because those employees make below 400 percent of the poverty line, which means that their employers would have to pay a penalty in many instances if they continued not to cover them.

"The industries with the highest concentration of such workers are restaurants, accommodation, building services, nursing homes and retail trade," the study said. "Retail and restaurants account for 47 percent of the most vulnerable group."

The study added that the 2.3 million workers identified as at greatest risk of having their hours reduced represents 1.8 percent of the U.S. workforce. That finding is consistent with research on the impact of Hawaii's health care law mandating employer coverage, the Berkeley researchers said. A 2011 study found a 1.4 percentage point increase in the share of workers working fewer than 20 hours a week because of the law, which mandates health coverage above 20 hours a week. The Berkeley study added that in Massachusetts, where the employer penalty is smaller than under the health law for not offering coverage, "there was no evidence of a disproportionate shift towards part-time work compared to the rest of the nation."

Blumberg said "2.3 million sounds like a big number, but it is a tiny fraction of the workforce." She also said the figure of those facing limited hours is likely below that. She said it should be adjusted downward to exclude the undocumented and those who will be Medicaid eligible under the health law, resulting in a number "considerably smaller than 2.3 million," she said. "And this doesn't take into account that some of these employers will likely decide to start offering coverage to these workers and shift some of their wage compensation to benefits in order to make the workers happy and fill the positions that they need filled with the right kind of people and avoid the firm costs of higher turnover and greater management," she added.

Blumberg also predicts other health law effects that employers and workers would find favorable, such as an enhanced ability of small employers to compete with large firms for workers because workers in small businesses will have an easier time finding reliable coverage in the individual market and in a number of instances will have subsidies to help them buy it. And in a separate study she conducted with researchers from Georgetown University, she found that the health law would boost entrepreneurship and self employment. "Overall, we estimate that the number of self-employed people in the United States will be about 1.5 million higher following the universal availability of non-group coverage, the financial assistance available for it, and other related market reforms," the study found.

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