Businesses Cut Employees’ Hours to Prepare for Health Care Reform

Published on November 14, 2012

BY EVA MOORE, Free Times

With President Barack Obama reelected to a second term, the health care reforms passed during his first term are set to take effect. And some employers are now facing the fact that they’ll be forced to offer health coverage to all employees who work more than 30 hours a week.

Here in the Midlands, Lizard’s Thicket owner Bobby Williams is in that position. His company made the decision to cut new employees to 28 hours a week. Long-time employees will continue to work 40 hours a week, he says.

“Absolutely they’re upset about it,” he says of the workers whose hours will be cut.

“We’re upset. It’s either that or close the restaurant.”

Williams says he’s following the lead of some larger chains.

Just in the past week, the restaurant group that owns Red Lobster and Olive Garden announced it will cut the hours of many new employees to below 30 hours a week.

Other restaurants have made similar but more politically tinged decisions, with both Papa John’s and an Applebee’s franchise owner drawing fire when they said they’d have to cut hours or freeze hiring because of the law.

A study cited by the Chicago Sun Times found that 18 percent of employers with any part-time employees are cutting workers’ hours in response to the law.

The requirement to provide health coverage applies only to businesses with more than 50 employees and takes effect in 2014.

Lizard’s Thicket, with 16 locations, employs about 700 people. Williams says it would cost $2 million a year to insure all of them — which would mean raising prices, an ugly choice in this economy.

Employers that don’t offer coverage will pay the government a $2,000 penalty per qualifying employee after the first 30 employees. So the fewer employees a business has working more than 30 hours, the smaller the penalty it’ll have to pay.

It’s hard to blame someone in Williams’ position, says South Carolina-based health care economist Lynn Bailey.

While most large companies already offer health coverage for employees, it’s less common in industries like restaurants, retail and home health care, Bailey says. There, employees often make a low wage and are uninsured.

And she’s worried that even under the new law, some people will still end up uninsured. Under Obamacare, people will be required to have health insurance. If low-income people’s earnings are low enough, they’ll qualify for Medicaid; otherwise, they’ll be asked to purchase subsidized insurance on a health insurance exchange set up by the federal government. (South Carolina has the option to set up its own exchange but declined to do so.)

Even with a subsidy, though, Bailey says it’ll be tough for some people to make up the difference, which could run to several thousand dollars a year. That could mean some people still end up without insurance.

“There are lots of unintended consequences of the Rube Goldberg Obamacare,” she says. “This is what you have when you don’t have a single payer. Everyone’s trying to push somebody from one place to another.”

In other words, it would have been easier to have the government act as health insurer, rather than trying to preserve the employer-funded model alongside separate programs like Medicare and Medicaid.

When it comes to restaurant workers and other low-wage employees here in South Carolina, there is a fix, according to Frank Knapp, president of the South Carolina Small Business Chamber of Commerce: The state should accept the expansion of Medicaid offered under the health care law.

“If the state of South Carolina expands Medicaid as prescribed in the Affordable Care Act, to 138 percent of the Federal Poverty Level, there’s a good chance that restaurant employees will be eligible for Medicaid,” Knapp says. “Then the employer’s not responsible for them.”

Gov. Nikki Haley has said the state will not expand Medicaid, calling it “a broken program” in a July statement.

For Williams, the current system works: His employees can go to the emergency room when they’re sick, and they don’t pay.

“I think we have a great system now,” Williams says. “Everybody gets treated.”

But Bailey and Knapp both disagree that emergency room care is the way to go.

“It’s just an unfunded mandate that gets passed on to insurance premium payers, employers, employees and taxpayers,” Bailey says. “It’s not health coverage.”

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