A new study sheds light on the health care benefit participation rates of part-time workers and how they might shift in 2014 when the Patient Protection and Affordable Care Act mandates affordable coverage for employees who work more than 30 hours a week.
Part-time workers at large U.S. companies that are eligible for health care benefits elect coverage at a significantly lower rate than full time employees, according to the 2012 Study of Large Employer Health Benefits from the ADP Research Institute.
While 77% of eligible full-time workers select health coverage, only 15% of part-time workers who are eligible for coverage do so. As a result, part-time employees represent less than 5% of the total population participating in their employer’s health coverage.
“The big question for employers is what happens in 2014 if the part time eligible population grows from 15% to 25% or 30% or more?” says Chris Ryan, chief strategy officer at ADP Strategic Advisory Services. “What happens if they start to respond more like a full-time workforce, which we know has much higher participation rates? There are some industries that are highly dependent on part-time and hourly workers for whom this could have a material financial impact on their company.”
The average employer in the study contributed roughly $7,225 per year in health premiums for each employee enrolled in the employer’s group health plans for the 2012 benefit year.
“There will be some employers for whom it makes sense to convert part-time workers to full-time or to change the composition of their workforce,” says Ryan. “For others it may mean having very tight control over time and labor reporting to ensure that, under the shared responsibility rules [of PPACA], people stay under the 30-hour rule.”
The study also suggests that employers that have a higher proportion of older workers may be at a higher risk of triggering PPACA’s excise tax in 2018. Known as the Cadillac tax, it imposes a 40% excise tax on the value of coverage exceeding certain limits.
While it’s well-known that there’s a relationship between the age of a population and total health premiums, the ADP study “established that a significant proportion of the variance of the cost of health care between different industries can be explained by the average age of participants alone,” says Ryan.
“While we might expect that [the] manufacturing [industry] might have more generous benefits and thus higher total premiums than [the] accommodation and food services [industry], the flip side is that the average age in accommodation and food services is substantially less so a significant portion of that cost is different,” he continues. “A challenge for employers is that, clearly, your workforce population — under certain circumstances — could put you at higher risk of triggering the excise tax and that’s something companies are going to want to think about.”
The study looked at 2012 data for health and welfare benefits from approximately 300 U.S.-based ADP clients, all with more than 1,000 employees.