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From Our CEO

September 4, 2012

Health Reform and Unintended Consequences

Ed Sealover, in last week’s Denver Business Journal, reported on a new survey from Mercer, the large human resources consulting firm. Mercer’s findings suggest that employers are thinking long and hard about the impact of the Affordable Care Act on their employees, on their benefit packages and on their overall profitability. The news may be surprising. It’s what I would consider one of the unintended consequences of the act.

Many employers – particularly those in hospitality and retail – are considering changing their “workforce strategy” rather than meeting new requirements to offer health benefits to part-time workers in 2014, according to the Mercer survey. 

Here’s the deal.  Companies with 50 or more employees will be required under the ACA to offer health insurance to both full-time and part-time employees in 2014.  Under the ACA, eligible part-time employees are those who work 30 or more hours a week. 

So, think of all those employers to which these new rules apply.  Every Jamba Juice and Quizno’s and Chipotle, for example. A full 46% of respondents representing retail and hospitality companies are planning to take action to avoid the financial penalties incurred if they don’t offer coverage.

And the strategy being most considered? Drop part-time employees to 29 hours a week. 

Time will tell which companies will implement such a change.  And we can also be reasonably certain that the intention of the ACA was not to restrict the hours a part-time employee is allowed to work. But every company has a financial and fiduciary responsibility to look at alternatives to the additional cost of adding employees to their health insurance roles. (The Mercer survey found that more than 60% of employers surveyed anticipate some increase in cost when the ACA is implemented in 2014.  A third of the respondents anticipate an increase of 5% or more). 

As our attention shifts from legal questioning of the ACA to implementation of the law, we expect to see more unintended consequences. One exploration, Unintended Consequences Of Steps To Cut Readmissions And Reform Payment May Threaten Care Of Vulnerable Older Adults, can be found in the July 2012 issue of Health Affairs magazine.  

CHI is committed to monitoring these consequences in the coming months and years.