This legislation left business owners deciding
how to balance their workforce between full-time and part-time employees. As a
result, economists anticipated a trend in 2015 following the onset of this new
law, with businesses leveraging more part-time employees to avoid being
required to offer healthcare to them in an effort to manage their operational
There are many pros and cons to the Affordable
Care Act and now, years after it was first passed, we’ll take a look at what
impact this provision actually had on the American workforce.
ACA Penalties for Employers
The IRS defines a full-time employee as
“an employee employed on average at least 30 hours of service per week, or 130
hours of service per month.” This left business owners deciding whether or not
to reduce employee hours below that amount.
The reason this decision was so critical for
business owners was because the provision also includes penalties to be paid
per employee by the business in certain scenarios. This meant weighing the cost
of paying those penalties against the cost of offering them healthcare, which,
for some companies and industries, is expensive and varies from month to month.
Shared Responsibility Payments
There are two types of healthcare options at
play: those available through the company and those available on the ACA
marketplace. Individuals who utilize plans from the ACA marketplace are
eligible for a premium tax credit.
Put simply, if an employee chooses to leverage
the ACA marketplace rather than the healthcare options from their employer, the
company they work for gets penalized. How they are penalized depends on if they
offer healthcare to 95% of employees or not.
If they don’t, their first 30 employees are
excluded but, after that, a $2,000 penalty is imposed for each employee,
regardless of how they get their healthcare.
For example, Company ABC has 100 employees and
offers healthcare to 60 of them. Since that’s below 95%, Company ABC owes a
penalty. After we exclude the first 30 employees, there are 70 employees
remaining. The fee of $2,000 applies to all 70, totaling to $140,000.
Companies that do offer minimum essential
coverage to at least 95% of employees are still subject to a penalty if at
least one of their employees opts out of the company-sponsored health plan and
receives the premium tax credit for purchasing a plan through the ACA
marketplace. This is a fee of $3,000, but only for the individuals who utilize
the ACA marketplace.
For example, let’s say Company ABC has 100 employees and offers healthcare to 95 of them. If one person leverages the ACA marketplace for healthcare – because the coverage isn’t sufficient, they can’t afford it or they aren’t included in the 95% offered healthcare through the company – then Company ABC owes a total of $3,000 in shared responsibility penalties.
Analyzing the Trends
Research has shown that businesses in all industries
remained mostly unchanged in terms of how their workforce was composed. Rather
than reducing part-time employee hours and increasing the number of workers,
businesses largely aimed to keep their workers and maximize their hours. The
number of full-time employees actually increased slightly while the number of
part-time employees decreased slightly.