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Businesses cut full-time workers to meet Obamacare mandate, study says (+video)

A study of small businesses found that many are cutting full-time workers or worker hours to comply with Obamacare. Franchises are making the biggest cuts.

By Staff writer / November 13, 2013

Insurance broker Jeff Lindstrom (r.) meets with Brandi and Darren Litchfield to discuss health insurance plan options at their home in Bothell, Wash., last month. Darren works for a startup company that doesn't yet offer an employee insurance plan, so they invited Mr. Lindstrom to outline the options for different health-care plans.

Ted S. Warren/AP/File

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Washington

First, President Obama had to backtrack from his promise that if you like your health insurance plan, under Obamacare "you can keep it." Now, a new study is suggesting that, under Obamacare, "If you like your workweek, you can’t necessarily keep it, either."

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About 30 percent of small franchises and 12 percent of other small businesses say they are cutting work hours – or swapping full-time for part-time workers – because of the law, according to a poll sponsored by business groups.

The moves are part of a bid to control health-care expenses, and they are a sign of how the Affordable Care Act (ACA), which was designed to greatly expand the number of Americans who have health insurance, could be having some unintended consequences in the job market.

A key Obamacare incentive is an “employer mandate” that asks businesses to sponsor health insurance (or pay a penalty) if they have more than 50 full-time employees. It defines a full-time worker as one serving 30 or more hours per week. So a firm can avoid the mandate by having fewer than 50 people working full-time.

Although the provision won’t be enforced until 2015, some employers with 40 to 500 workers have already started adjusting for the new landscape, the survey by Public Opinion Strategies found:

  • Some 31 percent of franchise businesses and 12 percent of non-franchise businesses say they have already reduced worker hours because of the law.
  • About 27 percent of franchise businesses and 12 percent of non-franchise businesses have already replaced full-time workers with part-time employees because of the law.
  • Some 41 percent of the non-franchise firms say they already see health-care costs rising because of the law. 
  • As the franchise firms look toward the future, 28 percent of them say they’ll stop offering health coverage in 2015 because of the law. One-third of franchise businesses already do not offer health insurance.

The poll arrives as Obamacare is already under attack for the botched rollout of its enrollment website, HealthCare.gov, and for insurance cancellations despite Mr. Obama’s pledge that if you like your health plan “you can keep it.”

Now, the business community is painting the workplace impact as a serious concern, and some labor groups have also voiced worry about the rise of the 29.5-hour workweek.

“Instead of providing affordable health care coverage to employees, the law will effectively take hours and wages away from Americans who need and want full-time jobs,” said Bruce Josten, executive vice president for government affairs at the US Chamber of Commerce, in a statement accompanying the study. “That’s bad for businesses and their employees.”

It’s less clear, however, if the law is bad for workers’ health coverage.

Employers in some industries such as the restaurant business may feel pressed to follow suit when competitors drop health benefits. But in some cases, workers will gain access to Obamacare subsidies and be able to get coverage with much stronger benefits than their employer had been offering.

Basically, the ACA is a law that hinges on two “mandates,” one for individuals and one for employers. It calls on all individuals to have health insurance starting next year, or to pay a tax penalty. And come 2015, the “employer mandate” kicks in for firms with more than 50 full-time employees.

The arrival of the individual mandate – with enrollment starting this fall – means that part-time workers are eligible for Obamacare subsidies and the benefit plans now offered on state exchanges under labels like “silver” and “bronze.”

The poll surveyed more than 400 businesses with 40 to 500 employees – the ones most likely to be affected by the ACA. About half were franchises such as restaurant chains, and half were non-franchise businesses.

The number of firms polled is small relative to the vast and varied realm of US employers. Pollster Bill McInturff of Public Opinion Strategies told reporters he’s “comfortable” that his sample represents the “known universe” of firms in this size range.

Citing the challenge that the 30-hour cutoff represents for worker paychecks, the business groups that sponsored the poll are supporting legislation to lift the definition of a “full-time” week to 40 hours.

They say it will help more workers get ample paychecks. Critics of the idea say the move could still prompt firms to cut work hours to avoid the employer mandate, with the effects falling on people who currently work about 40 hours per week.

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