What Obamacare may cost muniland workers

August 22, 2013

A handful of U.S. cities, led by Chicago, are working to shift retiree health care expenses (OPEBs) off their balance sheets and onto the federal government via President Obama’s Affordable Healthcare Act. Retiree healthcare is a big expense for muniland, and few governments have saved for this expense. Since OPEBs are often protected by contract, they are not easily lowered or adjusted. Spending such as education and other programs is often crowded out. Shifting some of these retiree benefits to Obamacare is attractive for many stressed cities.

Some municipalities are reducing employee hours to qualify them as “part time” under Obamacare rules. The municipality then wouldn’t have to provide health care. Asbury Park Press reports:

[Middletown, N.J.] shaved back hours for some part-time workers to avoid providing insurance required under the federal health care reform law, the Asbury Park Press has learned.

The change impacts about 25 part-time employees. But that could translate to a $775,000 annual increase in the township’s health insurance costs, based on the current benefits in place now, which are about $31,000 per employee.

Starting May 1, Middletown adjusted hours for part-time employees to make sure they work, on average, less than 30 hours per week, the threshold that the Affordable Care Act considers a full-time employee.

The blog cyniconomics.com has done a round-up of cities and school districts that are lowering part-time workers to less than 29.5 hours to exclude them from having to provide health care:

Is this the beginning of fewer public worker hours for states that are trying to reduce healthcare expenses? Somewhere along the line, someone needs to pay for the workers’ healthcare insurance. It will most likely be the employees themselves.

4.8 million people are employed in state and local governments on a part-time basis, according to the BLS. 25 percent of these have access to employer healthcare and 81 percent use this coverage. This is about 972,000 part-time employees. You can look at this as a big opportunity for state and local governments to create savings, or as a potential disaster for those who are using the benefits. If Obamacare encourages governments to shift more workers to part-time employment, we may see more of this.

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