Part-Time Workers Struggle With Health Care

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Part Time Workers Struggle With Health Care

Rising health care costs have led major employers to stop providing health care to part-time workers. Government programs are unlikely to help the situation.

Part-time workers are often on the financial edge, struggling to make ends meet, unable to find full-time work. With the weak jobs market, many workers are underemployed, seeking full-time positions but having to settle for part-time hours. To make matters worse, there is a growing trend amongst companies to no longer provide health insurance coverage to their part-time workers.

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The largest private employer in the United States, Walmart, has recently announced they will no longer offer health insurance to their new part-time hires. Walmart had been offering health benefits to its part-time workers since 1996, a valuable financial benefit to a position that did not come with a high wage.

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While the news may create negative PR for Walmart, the Fortune 500 company is hardly alone. The number of large employers offering health insurance benefits to part-time workers is down to 42% according to the Kaiser Family Foundation. The rate drops to just 16% of total businesses in the U.S., regardless of size. The cost of providing health care is often too steep for small companies with low payrolls.

While some large companies like United Parcel Service provide extensive health coverage to their workers based on union contracts, many more companies provide it voluntarily. Such companies are coming under pressure to change this policy as health care premiums continue to rise at levels well above inflation.

Some expect the situation for part-time workers to worsen if some of the provisions in the Affordable Care Act are enacted in 2014. One requirement of the new law requires employers with more than 50 employees to offer health benefits or face a $2,000 fine for each uncovered worker. However, the penalty only applies to full-time workers, not part-time workers. Under the Affordable Care Act, employers will face no penalty for not providing coverage to a worker who puts in less than 30 hours a week.

There is a concern the law will provide an incentive for employers to shift to more partial rather than full positions, leaving fewer workers with health coverage. A recent study by the Urban Institute found many employers would not make this switch, as offering good benefits helps retain talented workers. However, the study did find that companies with a high number of low wage workers would be more likely to drop their health plans.

The reason for this is another provision in the Affordable Care Act. Workers who are at or below 250% of the poverty level will be eligible for federal subsidies to purchase private health insurance. The amount of the subsidy declines as income rises above the poverty level. While this is of some benefit to less than full-time workers, the subsidy will likely not cover the full cost of insurance, leaving them behind where they would be with an employer-sponsored plan.

Because employers will face no fine for not providing health benefits to part-time workers, and because many of those workers will be eligible for federal subsidies, companies will have an incentive to create more part-time positions that do not offer health care.