Target is in the news again, but this time it’s not because of identity theft. The retail giant announced yesterday that it will stop offering health insurance coverage to its 361,000 part-time employees. Citing the availability of coverage through the exchanges and the low participation rates – only about 10% – the retail giant made the tough call to stop offering coverage.
Large employers like Target, of course, are not required to offer health insurance to their part-time employees, those working less than 30 hours per week on average, but some employers have offered coverage to this group in the past as a way of attracting quality employees. But now, with the subsidies available to families that earn less than 400% of the Federal Poverty Level and don’t have access to employer-sponsored coverage, it appears that part-timers actually have a better option available to them than the employer plan, which would likely block them from a subsidy if it were offered.
Target has said that it will give each of its part-time employees $500 to help them buy health insurance, though it’s unclear how they will do this. In a September 2013 technical release, the Department of Labor made it clear that pre-tax contributions for individual health insurance would no longer be permitted since the funding vehicles for these contributions, normally health reimbursement arrangements, cafeteria plans, or employer payment plans, are considered eligible employer-sponsored plans. This makes them subject to the PHS Section 2711 prohibition on lifetime limits for essential benefits and Section 2713 requirement that employer-sponsored plans offer unlimited up-front preventive care. Furthermore, since these tax-advantaged plans are considered employer-sponsored coverage, they would block an employee from receiving a premium tax credit. It is possible that Target is just bumping up the taxable income of these employees by $500, but that could impact the subsidy amount the employees qualify for since the tax credits are based on household income.
You can read more about Target’s decision in today’s StarTribune article by Jack Crosby.
In a related Associated Press article entitled “Insurance through work? Health law affects you too,” authors Carla K. Johnson and Tom Murphy point out that the Affordable Care Act “may prompt some companies to drop coverage for their part-time workers and send them to public health insurance exchanges,” something brokers have suspected for the past four years.
The decision by employers to shift employees to part-time and then stop offering coverage to part-time workers appears to be a trend, and as more and more employers dump workers from their group health plan, this creates an opportunity for agents who can offer a user-friendly solution to help get these employees enrolled. But there is certainly a communication issue since most news reports say that employers will send these employees to the public exchange. Insurance agents who might offer better technology solutions and advice from a licensed professional are rarely mentioned, which means brokers are missing some potential enrollment opportunities.
The best way, of course, to get a lot of employees to shop on your private exchange site is to team up with the companies that are dropping coverage for their part-time workers. HPA allows agents the opportunity to create a customized, branded site for these employers so that they can actually help their employees find qualified coverage and apply for a subsidy. To learn more, please attend one of our upcoming webinars.