How terrible. Home Depot (HD) and Trader Joe’s have decided to stop offering health insurance for part-time employees, moving them over to Obamacare instead. More companies seem sure to follow. And more wailing about greedy, heartless corporations is sure to follow that. Some workers may start to drop dead from sheer anxiety before Obamacare even goes into effect on January 1.
Once the new health law has been in place for a few months, however, Part-Time America may issue a collective sigh of relief. Nobody ever held up today’s part-time “mini-med” plans as model coverage. The majority of part-time workers don’t even get health insurance, and those who do typically get diluted plans with limited benefits they still have to pay something for. “You have to question whether that’s really insurance,” says Paul Fronstin, director of the health research program at the Employee Benefits Research institute. “They may not cover prescription drugs, and if you get cancer or end up in the hospital, they probably won’t help you a whole lot.”
Insurance offered under the Affordable Care Act, by contrast, could end up being a much better deal. Obamacare is complicated, and it will require many people to do detailed research on their insurance options instead of having an employer do it for them. There have also been elaborate efforts by foes of the program to depict it as The Ruination of Everything. So it’s not surprising that part-timers being told their employer is cutting them loose and sending them over to Obamacare are a little jumpy.
Actually enrolling could calm them down, however. Obamacare was designed to make decent health insurance affordable for people who otherwise can’t afford it, and whether you love or hate the program, it seems likely to succeed at that basic mission. That’s because the program subsidizes the cost of insurance based on your income, with the largest subsidies going to those with the lowest incomes.
Lots of confusion
There are many insurance choices under Obamacare that vary by state and apply to different income levels, which adds to the confusion. But the nonprofit Kaiser Family Foundation has built ahelpful calculator that lets you enter your income and a few other basic details to get an idea of how much insurance would cost you under the program.
A single parent with three kids and an annual income of $25,000, for instance, could get an $8,800 insurance plan for a total out-of-pocket cost of $500 per year. Subsidies, in other words, cover 94% of the cost. Try to beat that on part-time pay.
A two-parent family with two kids and a $50,000 income could get a $10,000 plan for $3,365, with subsidies covering 66% of the cost. There’s one catch: You only qualify for such deals if you’re not able to get coverage through your employer. So if you’re a part-timer whose company canceled your watered-down insurance coverage, it may have actually done you a favor.
Trader Joe’s is one employer known for offering generous health care benefits, even for part-timers (until now). But even those workers could end up better off under Obamacare. In an internal email published by the Washington Post, a Trader Joe’s exec provided some calculations for a part-time employee who earns about $24,000 per year and has been paying about $167 per month as her share of a Trader Joe’s policy similar to a “silver” plan under the ACA. If she enrolls in Obamacare, the subsidized cost would fall to about $70 per month for nearly identical coverage. And that’s before a $500 annual stipend Trader Joe’s plan to offer part-timers to help them pay for insurance.
Some will pay more
Without a doubt, there will be some people who end up paying more for insurance as their employers offer less. Mostly, they will be higher-income workers who lose employer-provided coverage and have to buy it through Obamacare. Subsidies are phased out at 400% of the poverty line, which this year is $45,960 for an individual and $94,200 for a family of 4. Above that, people have to pay the full cost of coverage.
Other companies have been changing their health care coverage in ways that sound like they’re related to Obamacare but aren’t. Walgreens (WAG), for instance, will begin requiring employeesto choose an insurance plan from a private “exchange” that offers at least 25 choices, instead of the three or four Walgreen’s has been offering. The concept is similar to the public exchanges that will be up and running under Obamacare, beginning October 1, with coverage beginning January 1. But the government plays no role and offers no subsidies in the exchange Walgreen’s is joining.
Walgreen’s will still bear much of the cost of its employees’ coverage, through fixed stipends it grants employees to help pay for care. But workers will now have to educate themselves more, choose coverage from a wide range of options, and pay the difference if they choose Cadillac coverage that costs more than the subsidy covers. The idea is to give employees a stronger incentive to control health care spending, by requiring them to pay more of their own money as costs rise.
IBM (IBM), Time-Warner (TWX) and General Electric (GE) have enacted similar plans for retirees, and companies in general are getting more aggressive about finding new ways to control health care spending as it become more and more of a burden. Obamacare may be part of the solution, but many companies would be doing this even without the health reform law. If the scaremongering over Obamacare ever stops, weathering changes in health care benefits may no longer require hypertension medication.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.