On Wednesday, the popular chain Trader Joe’s announced that it would stop offering health benefits to part-time workers who log less than 30 hours per week once the Affordable Care Act goes into effect. The Huffington Post reported on this with a piece titled ‘Trader Joe’s To Drop Health Coverage For Part-Time Workers Under Obamacare’ while Talking Points Memo published an article simply saying ‘Trader Joe’s Drops Health Care Coverage For Part-Time Employees.’
Social media users and conservative publications were quick to interpret the development as another chapter in the misleading narrative that Obamacare is forcing companies to drop health coverage or roll back workers’ hours. But Trader Joe’s decision isn’t an indictment of the health law at all. In fact, it’s a definitive sign that Obamacare is working as intended.
It’s important to note that Trader Joe’s will continue offering benefits to workers who work 30 or more hours per week. That’s the threshold that Obamacare establishes for large companies with 50 or more workers, and employers that don’t provide these basic health benefits will risk paying a $2,000 per employee fine for every worker past the first 30 workers beginning in 2015.
Trader Joe’s currently gives coverage to far more employees than the Obamacare requirements, providing health benefits to workers who log 18 or more hours per week. That’s extremely rare for American companies, considering that only 24 percent of part-time workers had any sort of employer-sponsored medical benefits as of March 2013, according to government data. This health coverage for part-time employees highlights Trader Joe’s efforts to be a good corporate citizen with robust worker benefits. Some other big companies, like Starbucks and Costco, share that philosophy about workers’ benefits.
But these companies only feel they need to go out of their way to provide workers with health coverage because of America’s utterly broken health care system, which leaves vast segments of the working poor without health insurance. About 42 percent of American adults living below the Federal Poverty Line (about $11,500 per year) are uninsured; that number only dips down to 40 percent for individuals making under 200 percent FPL, or approximately $23,000 per year.
Now, employers like Trader Joe’s don’t have to offer health coverage to Americans at these income levels anymore. That’s because the employees will soon have a place to buy affordable insurance: Obamacare’s statewide marketplaces. Plans sold through the marketplaces must offer robust benefits across ten broad categories, including for hospital visits, mental health services, and prescription drug coverage. Americans making up to 399 percent FPL will receive government subsidies on a sliding scale to help pay for this coverage, and Trader Joe’s will even give employees who will be affected by the change $500 to help them adjust to the transition.
“Depending on income you may earn outside of Trader Joe’s, we believe that with the $500 from Trader Joe’s and the tax credits available under the ACA, many of you should be able to obtain health care coverage at very little if any net cost to you,” wrote Trader Joe’s CEO Dab Bane in an internal company memo.
Some Trader Joe’s employees who work less than 30 hours per week are understandably concerned with the uncertainty that comes along with the company’s decision. One young employee who works about 28 hours per week and makes less than $20,000 per year told the Huffington Post that she is anxious her coverage through the health law’s marketplaces may not be equivalent to Trader Joe’s cheap and robust employee policies.
But the available data shows that a 21-year-old making $18,000 per year will receive generous federal subsidies and only pay about $65 per month for a mid-level “Silver” plan on an Obamacare exchange (although these figures will vary for different people based on their age and geographic region). That policy would cover 87 percent of the person’s medical costs according to the Kaiser Family Foundation’s subsidy calculator — and because of the low income level, the plan deductible would be capped at $500. That’s actually a bit cheaper than the $70 per month policies reportedly offered by Trader Joe’s and covers a larger share of medical costs.
What this goes to show is that Obamacare will finally create a workable insurance market for the very people that have never had access to one. That’s a boon to employers like Trader Joe’s, who will no longer have to go the extra mile to pay for part-time workers’ health benefits. It’s especially good news for the working poor at other companies that don’t already provide part-time benefits, who have had to largely forgo health coverage for decades due to a lack of affordable options.