When changing ACA full-time definition, careful what you wish for

One of the stated priorities of the newly inaugurated Republican-controlled 114th Congress is to modify the Affordable Care Act’s (ACA) definition of a full-time worker under the employer shared responsibility rule. The law requires that employers with at least 50 full-time-equivalent workers offer health coverage to employees who work at least 30 hours per week, or else pay a penalty. Republicans have vowed to repeal this “burdensome” employer mandate, which they say puts as many as 2.6 million working-age Americans at risk of losing jobs or income as employers reduce their hours in order to stay under the 30-hour threshold. To that end, one of the first actions of the House of Representatives was to pass H.R. 30, the Save American Workers Act of 2015, which rewrites the definition of a full-time worker under the ACA from 30 to 40 hours per week. The debate then moved over to the Senate where S. 305, the American Job Protection Act, was introduced in early February.

{mosads}Although the U.S. Chamber of Commerce and other employer groups support the congressional action, there is little evidence to date that employers are actually reducing workers’ hours in order to avoid the penalty. One reason for the apparent inaction may be that only a small minority of U.S. workers — 7 percent — work between 30 and 34 hours per week. In contrast, 44 percent of American workers work 40 hours a week, a much larger group that could potentially be at risk under the Republican proposals should employers reduce work hours to stay under the intended 40-hour full-time threshold.

In addition, the redefinition of full-time workers would have a secondary effect; it would allow companies with 50 or more employees to withhold health coverage for employees working under 40 hours, without facing any penalty. While this might be a welcome event for employers — and many have called for this change — it may not be similarly welcomed by the taxpayers who ultimately would underwrite the subsidies given to eligible workers seeking health insurance through the ACA’s insurance marketplaces or expanded Medicaid programs. In fact, when the Congressional Budget Office examined the cost of restructuring the definition of a full-time worker from 30 to 40 hours, it concluded that the action would increase government costs by $46 billion over 10 years and worsen the national budget deficit.

The truth is that a small minority of employers will face the employer penalty. Businesses with fewer than 50 workers are exempt and 94 percent of companies with 100 or more workers already offer health insurance, as do nine out of 10 smaller companies who employ 50 to 99 workers. Taken together, based on Census Bureau figures, less than 1 percent of all companies will have to start offering coverage this year (or next, for smaller firms) or face a penalty under the ACA. This is not to discount the costs to thousands of businesses that will face penalties under the ACA for not complying with the employer mandate or to workers who may face wage slowdowns as their employers trade-off health insurance coverage for wage increases as they comply with the regulation. But overall, it is a rather small distortion of the current state of employer-sponsored health coverage.

Ultimately, and with no small irony, successful enactment of the Republican calls for a change in the definition of a full-time worker under the ACA might make the legislation more difficult to replace or repeal. Repealing the ACA in its entirety has consistently been the No. 1 anti-ObamaCare Republican priority, with the House of Representatives voting to repeal the law 55 times since its passage — most recently, a few weeks ago. If employers must offer health coverage only to those workers who work 40 or more hours per week, those who work fewer hours will increasingly turn to the insurance marketplaces or expanded Medicaid programs for health coverage. As a result, lest they lose access to subsidized care, fewer Americans may be inclined to reject the law altogether and public opinion could shift toward support of the ACA. Clearly, this outcome would not be welcome by those who hope to rescind the president’s signature legislation. Note to Republicans: Be careful what you wish for.

Engelhard is the director of the Health Policy Program at the University of Virginia School of Medicine’s Department of Public Health Sciences.