HR/BENEFITS

Will Redefining 'Full-Time' for Obamacare Help the Economy? Or Hurt It?

New bills coming to the floor of the House and Senate aim to increase the definition of "full-time" from 30 to 40 hours a week.
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For many business owners, the most vexing piece of the Affordable Care Act is the way the law defines a full-time worker. In the real world, a full-timer is commonly understood as someone who puts in at least 40 hours a week. But the ACA sets the full-time threshold at just 30 hours--and penalizes large employers (those with 50-plus employees) who don't offer health benefits to workers that hit that target.

On February 4, the House Ways and Means Committee approved a bill--the Save American Workers Act--that would redefine full-timers as workers averaging at least 40 hours per week. Supporters of the Act argued that the 30-hour rule encourages employers to cut employee hours and reduce their compensation, and restricts business growth. Of course--and more to the point--the new bill would mean that employers would be responsible for insuring fewer of their workers. The Food Marketing Institute and National Grocers Association are among the retail groups backing the bill. Opponents of the Act, however, argue that a 40-hour rule would put even more employees at risk of having their hours--and paychecks--reduced.

The bill is expected to come up for a vote on the House floor later this week, where it will likely be approved. The outcome of similar legislation in the Senate--The Forty Hours Is Full Time Act--is less certain.

How would changing the full-time definition impact the economy more broadly? Would the country be better off? That depends who you ask. The conservative Hoover Institution claims that the 30-hour threshold puts 2.6 million people at risk of having their hours reduced and losing their insurance. The nonpartisan Congressional Budget Office, however, argues that shifting to a 40-hour rule would also have negative consequences--causing 1 million workers to lose their work-based insurance policies. The CBO estimates that half of these workers would be forced into an ACA exchange plan, Medicaid, or the Children's Health Insurance Program. The other half wouldn't get any health insurance at all.

What's more, the CBO warns that raising the full-time threshold would increase the federal deficit by $74 billion--because many people kicked out of employer plans would qualify for subsidized exchange coverage, and employer penalties collected by the government would be reduced. The CBO report also predicts that "most of the affected employers would continue to offer coverage because most employers construct compensation packages to attract the best available workers at the lowest possible cost." Typically, the most attractive packages include health benefits.

Regardless of what happens with this particular piece of legislation, smaller "large" businesses still have some time to figure out what they will do. Thanks to a recent extension, businesses with 50 to 99 employees now have until January 2016 to start offering health coverage to full-timers. And since 2016 is an election year, there's just no predicting what the rules will actually be by then.

Last updated: Mar 4, 2014

ADAM BLUESTEIN

Adam Bluestein is a frequent contributor to Inc., writing about health care, innovation, and new technology. He lives with his wife and two children in Burlington, Vermont.




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