Chain retailer Target announced on Wednesday that it will stop offering health insurance to employees who work less than 30 hours per week, instead sending these workers to Obamacare’s insurance marketplaces to buy new plans.
The announcement was quickly picked up by conservative outlets as proof that the health law is giving workers short shrift. To the contrary, these part-time workers will most likely be better off under Obamacare plans, and Target’s decision to shift the employees into the marketplaces is definitive proof that the health law is doing exactly what it’s intended to do.
It’s important not to conflate Target’s move — one that some other companies like Trader Joe’s have also made — with the actions of some big-name employers who are using Obamacare as a convenient excuse to slash their workers’ hours. Target will continue offering insurance to those who work for 30 hours or more per week, the threshold Obamacare sets for large employers with 50 or more employees. The company won’t be cutting anyone’s work week in order to save on its bottom line, will employ consultants to help workers sign up for new health plans, and will give them a one-time cash payment of $500 to help with the cost.
Just 10 percent of the Target employees who work for less than 30 hours per week use the company’s part-time health care plan to begin with, according to Target spokespeople. And the fact that Target even offered these benefits to its part-time workers makes the firm unique among American employers, as data from the Department of Labor shows that only one in four part-time workers had any sort of employer-sponsored medical benefits last spring. These plans were a genuine effort by Target to provide basic health benefits to all of their workers, since part-timers who tend to have low incomes didn’t have a wealth of choices when it came to health coverage in the pre-Obamacare market.
But they do now. “The launch of Health Insurance Marketplaces provides new options for health care coverage that we believe our part-time team members may prefer,” explained Target’s Executive Vice President of Human Resource Jodee Kozlak in a post on one of the company’s websites. “In fact, by offering them insurance, we could actually disqualify many of them from being eligible for newly available subsidies that could reduce their overall health insurance expense.”
The sorts of plans that retailers and restaurants offer to part-time workers are nothing approaching comprehensive. Many of these are so-called “limited liability plans” that cap coverage at anywhere between $4,000 and $20,000 per year (not even enough to cover an overnight hospital stay in many areas) and are now outlawed under the health law.
By contrast, Obamacare’s marketplace plans have to offer comprehensive benefits, including for mental health services and prescription drugs, and cannot place annual or lifetime limits on coverage. Since the law’s federal insurance subsidies for people between the poverty level and four times the poverty level are scaled based on income, part-time Target employees would likely get especially generous financial assistance under Obamacare.
Consider this scenario: A 27-year-old non-smoking Target employee named Jane makes $12 per hour and works 29 hours per week. Jane has a pre-tax annual income of about $16,704, meaning she is at about 145 percent of the Federal Poverty Level (FPL). The Kaiser Family Foundation’s (KFF) subsidy calculator shows that Jane would pay less than $52 per month for a mid-level “Silver” plan under Obamacare after getting her premium subsidy.
Since Jane makes less than 2.5 times the poverty level, she’d be eligible for even more Obamacare cost-sharing subsidies that would limit her yearly deductible and hold her maximum out-of-pocket medical expenses at $2,250 per year. An employee who made even less, like a 24-year-old non-smoker making $9 per hour, would qualify for Medicaid if he or she lived in a state that took place in Obamacare’s expansion of the program, or would have to pay just $20 per month for a Silver plan on the marketplaces. The one-time $500 cash payment that Target is offering to workers who have to change their health plans would cover nearly an entire year of Jane’s premiums, and several years worth of premiums for someone making less than $10 per hour.
Moving employees who work less than 30 hours per week onto Obamacare’s marketplaces is not a flaw of the health law — it’s actually one of its core goals. In the long run, this move will provide part-time workers with comprehensive coverage that they didn’t have through their employers or couldn’t afford on the individual market before Obamacare took effect; it will guarantee that these workers’ insurance coverage isn’t inextricably linked to their employment; and it will do all of this while saving employers money.