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Target to Discontinue Providing Health Insurance for Part Timers

Monday, January 27, 2014

By Alex Wayne  

Jan. 22 --Target Corp. will cease providing health insurance to part-time employees in April, joining Trader Joe's Co., Home Depot Inc. and other U.S. retailers that have scaled back benefits in response to changes from the Affordable Care Act, the company announced Jan. 22.

About 10 percent of part-time employees, defined as those working fewer than 30 hours a week, use Target's health plans now, according to a posting yesterday on the Minneapolis-based company's website. Target is the second-largest U.S. discount retailer by sales and had about 361,000 total employees last fiscal year, according to data compiled by Bloomberg.

The ACA creates a system of penalties and rewards to encourage people to obtain medical insurance. The law doesn't require most companies to cover part-time workers, and offering them health plans may disqualify those people from subsidies in new government-run insurance exchanges that opened in October.

“You see a lot of retailers making adjustments in contemplation of the full effect of the employer mandate penalties in 2015,” Neil Trautwein, a lobbyist with the National Retail Federation, a trade group in Washington, said in a telephone interview. “Even though it is not effective yet, it is already having an effect on the job market and putting companies where they would probably not otherwise want to be.”

The move also should reduce the cost of Target's health benefits, Trautwein said.

New Options

The health law requires all companies employing 50 or more people to offer health insurance to those working at least 30 hours a week beginning in 2015. Those that don't comply may be liable for fines of as much as $3,000 per worker.

“Health-care reform is transforming the benefits landscape and affecting how all employers, including Target, administer health benefits coverage,” Jodee Kozlak, Target's executive vice president of human resources, said in the Jan. 22 web posting. She cited “new options available for our part-time team, and the historically low number of team members who elected to enroll in the part-time plan.”

No Target workers will see their hours cut as part of the change, she said. A Target spokeswoman, Jill Hornbacher, wouldn't say how many part-time workers the company employs, saying the number “fluctuates often.”

Subsidy Eligible

The ACA created new government-run health insurance exchanges to sell coverage to uninsured people, often with premiums discounted by federal subsidies. It disqualifies Americans for subsidies at the exchanges if they have an offer of “affordable” coverage from their employers, defined as an insurance premium less than 9.5 percent of their income.

Target said it plans to pay $500 to part-timers losing coverage, and a consulting firm will help those workers sign up for new plans under the health care law exchanges. It said on its website that many part-time workers might prefer coverage from the exchanges, and that by offering them insurance, “we could actually disqualify many of them from being eligible” for subsidies.

Health care coverage for Target employees who work fewer than 30 hours a week will end April 1, the company said. Open enrollment for 2014 under the ACA closes a day earlier.

Hourly Threshold

Trautwein's organization is lobbying Congress to raise the threshold that determines whether workers must be offered insurance to 40 hours per week. Labor unions also have complained that the 30-hour limit could lead to reductions in hours for part-time employees, as companies seek to avoid offering them health insurance.

Employers had been dropping coverage for workers for more than a decade preceding passage of the ACA, according to Joanne Peters, a spokeswoman for the Department of Health and Human Services.

“But now, unlike before, employees have the option of shopping in the marketplace for quality, affordable coverage, where they may be able to qualify for a tax credit to help pay for the cost,” Peters said.

 

With assistance from Renee Dudley in New York. Editors: Romaine Bostick, Bruce Rule

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

 

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