Retail giant Target Corp. has decided to drop its health care plan for part-time workers, citing low participation and saying its workers will be better off applying for coverage under the Obamacare insurance exchanges.
In a blog post Tuesday, the Minneapolis-based retailer said it will ease the transition by doling out a $500 cash payment to each employee who loses coverage.
Target pitched the change as common sense, yet did not say how much the move could save the company. The company also suggested it was doing employees a favor by getting out of the way of health care options under the Affordable Care Act.
“The launch of health insurance marketplaces provides new options for health care coverage that we believe our part-time team members may prefer,” the company said in the posting, which featured its top human resources official. “In fact, by offering them insurance, we could actually disqualify many of them from being eligible for newly available subsidies that could reduce their overall health insurance expense.”
The company said less than 10 percent of its employees participate in the company’s health care plan for part-timers, but the move raises questions about how the Affordable Care Act might influence employer-based coverage, where a large majority of Americans get their coverage. Analysts say employers may be inclined to move health care coverage into the individual market and state-based exchanges, where people may be eligible for government subsidies based on income.
Target is not the first company to announce changes to its health care plan as Obamacare rolls out in earnest.
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In August, UPS said it would drop health care coverage for about 15,000 employees’ spouses who are eligible for coverage from their own workplaces. The company said the move was its best option to keep health care costs in check, given Obamacare’s fees and mininum-coverage requirements.
Assessing the impact of Obamacare on the employer-based market is tricky, given the myriad factors that affect annual premium changes.
But given the political climate and the early problems with HealthCare.gov and the individual market, many critics are poised to blame any premium increases on the law.
Analysts have said smaller employers face the biggest consequences because they are less able to handle adverse changes to the balance of sick and healthy employees than larger firms can. It is a pressing concern because the law prohibits insurers from rejecting people with pre-existing conditions and from charging older consumers more than young people by more than a 3-1 ratio.
Additionally, the health care overhaul includes numerous taxes and fees that may be passed along to consumers in the employer-based insurance market.
Target said employees who work 20 to 31 hours still may qualify for vacation, dental, disability, life insurance and 401(k) benefits. Also, the company said it had no plans to cut hours as part of the move.
“At any time, our team members can talk to their manager about their interest and availability to work more hours,” the company said. “In fact, during the holiday season we offered our year-round part-time and full-time [employees] the opportunity to take on additional hours or cross-train to work in other areas — at their request.”
Target entered the health care debate this month unwittingly.
Hoping to drum up support for an Obamacare Web privacy law, House Republicans cited the millions of Target customers who had to monitor their bank accounts after hackers stole their credit card numbers.
With the help of 67 Democrats, the House passed the bill, which requires the federal government to notify consumers within two days if their personal data has been breached on online-based insurance markets tied to the health care overhaul.