Beginning in 2014, part-time employees working 30 hours or more per week will fall within the mandate for employer-provided health coverage, potentially driving up employer costs, according to a study by the research arm of benefits administrator ADP.
The findings of ADP's 2012 Study of Large Employer Health Benefits—which surveyed U.S. employers with 1,000 or more employees (including full-time and part-time workers)—found that:
- 88 percent of the full-time workforce was eligible for an employer-sponsored health plan.
- 77 percent of eligible full-time employees elected to participate in the plan.
- As a result, 68 percent of full-time employees were covered by an employer’s plan.
By contrast, among part-time employees who make up 23 percent of the U.S. workforce:
- Only 15 percent were eligible for an employer-sponsored health plan.
- Slightly more than half (53 percent) of eligible part-time workers elected to participate in their employer's plan.
- As a result, about 8 percent of part-time employees participated in an employer-sponsored health plan, and part-time workers represented less than 5 percent of the total workforce (full- and part-time) covered by an employer’s plan.
The gap between part-time and full-time insured workers looms large, as the "shared responsibility" provision of the Patient Protection and Affordable Care Act (PPACA) requires that, beginning in 2014, employers with 50 or more full-time equivalent employees either:
- Provide affordable coverage to any employee working 30 or more hours per week or 130 hours per month ("insurance-elgible employees"), or
- If the employer does not offer coverage to employees, pay a penalty of $2,000 times the total number of insurance-eligible emplolyees if at least one such employee receives a tax credit to purchase coverage through a government-run health insurance exchange established under the PPACA.
- If the employer does offer coverage to insurance-eligible employees but the coverage is “unaffordable” to certain employees or does not provide minimum value, the employer faces a penalty of $3,000 times the number of insurance-eligible employees receiving tax credits for exchange coverage (not to exceed $2,000 times the total number of insurance-eligible employees).
"Potentially, this provision could create a spike in part-time employees eligible for benefits starting in 2014," ADP spokesman Jim Larkin told SHRM Online. "The eligibility percentage remains a critical question because even small changes to this number can have a material impact on an employer's benefit costs. For this reason, we expect employers to manage and monitor part-time eligibility closely."
Bigger Is Cheaper
In 2012 the total reported health premiums surveyed employers paid averaged approximately $9,562 per participating employee, the ADP Research Institute found. However:
- Average premiums fell to $8,921 for employers with more than 5,000 employees.
- Average premiums rose to $10,351 for employers with 1,000 to 2,499 employees—about 14 percent higher than premiums paid by the largest employers.
“An advantage of the $1,430 that the largest employers saved per participating employee per year is that they can redirect these savings to higher direct compensation, workforce training and development, or to the company's bottom line," Larkin said.
Possible explanations for larger employers' lower costs, according to the survey report, include:
- They have more effective purchasing practices—and increased negotiating power—with health plans, networks and third-party administrators.
- They are more likely to operate self-funded plans, with the potential to reduce total premiums.
- They are more likely to put employee health and wellness programs in place to contain costs.
Stephen Miller, CEBS, is an online editor/manager at SHRM.
Full-Time Employee Worksheet, BenefitMall, 2013
Making the ‘Play or Pay’ Decision, SHRM Online Benefits, February 2013
Proposed Rule Clarifies Employer Mandate Calculations, SHRM Online Benefits, January 2013
Two New PPACA Affordability Safe Harbors Proposed, SHRM Online Legal Issues, January 2013
Coverage 'Threshold' Causes Concern, SHRM Online Legal Issues, January 2013
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