Letting Employers Off the Hook


— by Rich Dunn, NVRDC 2nd Vice Chairman

H.R. 2575, the “Save American Workers Act” (which is a bill, not an act), would change the definition of “full time” under the ACA from 30 to 40 hours, allowing employers to evade the health care mandate entirely simply by lowering hours worked to 39½. Needless to say, this bill has zero chance of ever becoming law while Barack Obama is president.

H. R. 2575:  To amend the Internal Revenue Code of 1986 to repeal the 30-hour threshold for classification as a full-time employee for purposes of the employer mandate in the Patient Protection and Affordable Care Act and replace it with 40 hours.
1. Short title
This Act may be cited as the Save American Workers Act of 2014.
2. Repeal of 30-hour threshold for classification as full-time employee for purposes of the employer mandate in the Patient Protection and Affordable Care Act and replacement with 40 hours
(a) Full-Time equivalents
Paragraph (2) of section 4980H(c) of the Internal Revenue Code of 1986 is amended—
(1) by repealing subparagraph (E), and
(2) by inserting after subparagraph (D), the following new subparagraph:
(E) Full-time equivalents treated as full-time employees
Solely for purposes of determining whether an employer is an applicable large employer under this paragraph, an employer shall, in addition to the number of full-time employees for any month otherwise determined, include for such month a number of full-time employees determined by dividing the aggregate number of hours of service of employees who are not full-time employees for the month by 174.
(b) Full-Time employees
Paragraph (4) of section 4980H(c) of the Internal Revenue Code of 1986 is amended—
(1) by repealing subparagraph (A), and
(2) by inserting before subparagraph (B), the following new subparagraph:
(A) In general
The term full-time employee means, with respect to any month, an employee who is employed on average at least 40 hours of service per week.
(c) Effective date
The amendments made by this section shall apply to months beginning after December 31, 2013.
Passed the House of Representatives April 3, 2014.

It’s not clear that this bill would necessarily make a lot of difference in the real world, since 98% of large employers already provided health coverage to their full time employees before the ACA imposed the mandate, but it has become so expensive that if one company did it, others might follow to stay competitive.

But even without this change, some companies might decide to just pay the penalty and dump their employees on the exchange, where the subsidies would (like food stamps) amount to just another layer of corporate welfare. The penalty (around $2,000 per employee) is far lower than the cost of health care (around $10,000 per employee).

To keep their employees whole, companies dropping health coverage could increase wages by the amount of their subsidized exchange premiums. Or even a little more. In that scenario, both the employer and the employee would come out ahead, but exchange premiums would inevitably rise to pay for the subsidies. This is an inherent flaw in the ACA. Employer penalties are way too low.

On April 3rd, H.R. 2575 (raising the “full time” threshold to 40 hours) passed House 248 to 179, with these 17 “Republicrats” voting Aye:

Aye   D   Barber, Ron AZ 2nd
Aye   D   Sinema, Kyrsten AZ 9th
Aye   D   Bera, Ami CA 7th
Aye   D   Costa, Jim CA 16th
Aye   D   Murphy, Patrick FL 18th
Aye   D   Bishop, Sanford GA 2nd
Aye   D   Barrow, John GA 12th
Aye   D   Lipinski, Daniel IL 3rd
Aye   D   Schneider, Bradley IL 10th
Aye   D   Delaney, John MD 6th
Aye   D   Peterson, Collin MN 7th
Aye   D   McIntyre, Mike NC 7th
Aye   D   Schrader, Kurt OR 5th
Aye   D   Gallego, Pete TX 23rd
Aye   D   Cuellar, Henry TX 28th
Aye   D   Matheson, Jim UT 4th
Aye   D   Rahall, Nick WV 3rd

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