Efforts to Change the ACA’s Definition of a Full-Time Employee

February 19, 2015

Last month, both the House of Representatives and the new Republican-controlled Senate introduced legislation that would change the definition of a full-time employee under the Patient Protection and Affordable Care Act (ACA) from 30 to 40 hours per week. The House version of the bill passed on January 8, 2015. The Senate version has been referred the Finance Committee.

The stakes are high. The ACA’s employer mandate now requires employers with 100 or more full-time employees to provide health insurance that includes a set collection of benefits laid out in the ACA, or pay a penalty. This “pay or play” employer mandate goes into effect for employers with 50 to 100 full-time employees in 2016.

President Obama has promised to veto any bill that walks back provisions of the ACA and this bill in particular. It is unclear that either the House or the Senate could muster the two-thirds vote required in both chambers to override his veto.

Proponents of the bill argue that raising the cutoff for full-time work to 40 hours per week would take pressure off employers and lessen the chances they would cut workers’ hours to under 30 per week to avoid having to provide health insurance.

Opponents argue that employers are more likely to cut hours if the threshold is 40 hours per week, putting many workers in the 35 to 39 hours per week range at risk of becoming part time under the law.

The debate will no doubt continue.

However, the 2014 Towers Watson Health Care Changes Ahead Survey offers insight into the focus of U.S. employers’ planned response to the ACA’s employer mandate. Completed in July 2014 by 379 employers that collectively employ 8.7 million people, the survey revealed that 75% of employers plan no changes to their workforce strategy or mix of part-time employees in 2015 or 2016. Moreover, 91% of employers that offer health plans to part-time employees are “not at all likely” to discontinue them in that timeframe.

Ben Lupin, senior regulatory advisor for Towers Watson Health and Group Benefits, cautions employers not to count on the passage of a bill redefining full-time work as 40 hours a week. “The stakes are too high,” says Lupin. “Better to act as if the 30-hour cutoff is set in stone and move forward accordingly. When the option is to ‘pay or play,’ paying a penalty is simply too onerous to consider.”

For additional insights from Lupin on the “pay or play” option, see our blog post on the ACA reporting requirements that went into effect on January 1, 2015, here.

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