Sky-Is-Falling Fears About Employer Mandate’s Impact On Workforce Unfounded

As debate continues about the impact of the Patient Protection and Affordable Care Act’s (ACA) employer mandate on the U.S. workforce, an Issue Brief by the Commonwealth Fund concludes that the mandate will have little impact on the workforce. Fewer than 10 percent of full-time workers might see reductions in employment or hours in the short run, according to the brief.

Background. Under the ACA, an applicable large employer (ALE) may be assessed a penalty if the ALE fails to offer at least 95 percent (70 percent for 2015) of its full-time employees the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan or the ALE offers the opportunity to enroll in such coverage but the coverage is unaffordable to the employee or does not provide minimum value.

An ALE is any employer that employed on average at least 50 full-time employees, full-time equivalents (FTEs), or some combination on business days during the preceding calendar year. A full-time employee for purposes of determining ALE status is an employee who was employed on average at least 30 hours of service per week or 130 hours of service in a calendar month.

Workers near threshold. The brief explains that the mandate is most likely to impact workers in firms with around 50 FTE employees or those working close to 30 hours per week. Employers might choose to lay off workers or reduce worker hours to avoid providing coverage or being assessed penalties.

Using data from the Small Business Administration and the Medical Expenditure Panel Survey to estimate the number of workers who may be at risk of losing hours or positions, the study found that about 24 percent of workers are employed in firms with fewer than 50 FTE employees. About 1.66 percent of all employees work full time in firms near the 50-worker threshold. About 2.59 percent of the workforce is employed 30 to 34 hours per week in a firm with 50 or more FTE employees.

“Among those who are employed near the thresholds, the overwhelming majority (88 percent of those near the firm-size threshold and 71 percent of those near the hourly threshold) are employed by firms that already meet the mandate requirement by offering coverage to their employees. Among those workers who do not have an offer, many hold insurance coverage from an alternate source, and thus would not count toward an employer penalty. Less than one-half of 1 percent of workers (.09 percent of workers near the firm-size threshold and .26 percent of workers near the hourly threshold) work at firms that do not offer them coverage and are uninsured,” the brief states.

Less expensive to comply. The brief also notes that firms that do not already comply with the mandate are likely to find complying less expensive than trying to avoid the mandate. Not only are hiring and training costs often substantial for entry-level employees, but also, hiring two 20-hour/week employees often costs more in supervision, scheduling, and hiring costs than hiring a single 40-hour/week employee. In addition, because overtime pay is higher than regular pay, it can be more costly to increase hours for existing workers rather than hiring an additional employee.

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