Target Corp. will end health insurance for part-time employees in April, joining Trader Joe’s Co., Home Depot Inc. and other U.S. retailers that have scaled back benefits in response to changes from the Affordable Care Act.
About 10 percent of part-time employees, defined as those working fewer than 30 hours a week, use Target’s health plans now, according to a posting on the Minneapolis-based company’s website. Target is the second-largest U.S. discount retailer by sales and had about 361,000 total employees last fiscal year, according to data compiled by Bloomberg.
The U.S. Patient Protection and Affordable Care Act is the largest regulatory overhaul of health care since the 1960s, creating a system of penalties and rewards to encourage people to obtain medical insurance. The law known as Obamacare doesn’t require most companies to cover part-time workers, and offering them health plans may disqualify those people from subsidies in new government-run insurance exchanges that opened in October.
“You see a lot of retailers making adjustments in contemplation of the full effect of the employer mandate penalties in 2015,” said Neil Trautwein, a lobbyist with the National Retail Federation. “Even though it is not effective yet, it is already having an effect on the job market and putting companies where they would probably not otherwise want to be.”
The move should also reduce the cost of Target’s health benefits, Trautwein said.
The health law requires all companies employing 50 or more people to offer health insurance to those working at least 30 hours a week starting in 2015. Those that don’t comply may be liable for fines of as much as $3,000 per worker.
“Health care reform is transforming the benefits landscape and affecting how all employers, including Target, administer health benefits coverage,” Jodee Kozlak, Target’s executive vice president of human resources, said in the Web posting. She cited “new options available for our part-time team and the historically low number of team members who elected to enroll in the part-time plan.”
No Target workers will see their hours cut as part of the change, she said. A Target spokeswoman, Jill Hornbacher, wouldn’t say how many part-time workers the company employs, saying in an e-mail that the number “fluctuates often.”
The Affordable Care Act created new government-run health insurance exchanges to sell coverage to uninsured people, often with premiums discounted by federal subsidies. It disqualifies Americans for subsidies at the exchanges if they have an offer of “affordable” coverage from their employers, defined as an insurance premium less than 9.5 percent of their income. Target plans to pay $500 to part-timers losing coverage, and a consulting firm will help those workers sign up for new ACA plans. It said on its website that many part-time workers may prefer coverage from the health law’s exchanges and that by offering them insurance, “we could actually disqualify many of them from being eligible” for subsidies.
Coverage for employees who work fewer than 30 hours will end April 1, Target said. Open enrollment for 2014 under the Affordable Care Act closes a day earlier.