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Employers May Reduce Hours To Avoid Obamacare Costs

America Hernandez |
September 26, 2013 | 1:05 p.m. PDT

Staff Reporter

(Denise Guerra, Neon Tommy)
(Denise Guerra, Neon Tommy)

Some businesses with over 50 employees have begun reducing employee hours and relying on part-time workers in an effort to avoid paying for the health insurance mandated by Obamacare in 2015.

Under the Affordable Care Act, these companies will be required to provide health insurance to all employees working 30 hours or more per week, or face a $2,000 penalty for each uninsured worker.

While this employer requirement goes into effect Jan. 1, business will not be penalized for non-compliance until the following year, in order to provide time for adjustment.

But for some businesses, the adjustment will be to workers' schedules-- not to their budgets.

Restaurants in particular are shifting away from full-time employees in preparation for Obamacare's onset.

"We won't start hiring full-time people," said Ken Adams, owner of 10 Subway sandwich shops, to the Wall Street Journal.  When some of his full-time employees left in May and June of this year, WSJ reported, Adams replaced them with 25 part-timers in anticipation of the new health care law.

Adams is not alone: UPS has publicly announced it will no longer cover spouses under employee benefits if they are covered elsewhere, while Trader Joe's and Home Depot will stop offering health insurance to part-time workers, directing them to the open marketplace known as the Obamacare Health Insurance Exchange (HIX), which goes live online Oct. 1.

But according to the Kaiser Family Foundation, over 90 percent of employers required to provide health insurance under Obamacare already do, and are expected to continue offering it in 2014.

"The health care law should be a reason or a motivation to cut benefits for either the employee or spouses," said Starbucks CEO Howard Shultz in an interview with CNN. He affirmed that Starbucks will absorb the increased costs of Obamacare and continue to provide coverage to employees.

According to analysts, the businesses that will feel the most squeeze are those with 50-200 employees. While they are vulnerable to being penalized by the government for non-compliance, they also are too small for insurance companies to compete over by offering more attractive rates.

Additionally, in some states there may only be one or two choices of insurance providers, calling into question the goverment's claim that the new system will benefit Americans by allowing them to compare plans side-by-side and shop for the best rate.

Employers with less than 25 employees are not required to offer health insurance to workers, but are eligible to receive a tax credit for up to 50 percent of premium costs should they choose to offer it through the Small Business Health Program (SHOP).

Employers have until Oct. 1 to notify employees of coverage options for the new year. At that time, Obamacare's health insurance marketplace will go live online, selling coverage to the uninsured and offering alternative coverage to employer-sponsored health insurance for 2014.

 

Read more about Obamacare here.

Reach Staff Reporter America Hernandez here.



 

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