HR 30 - Defining full-time worker for ACA has costs

The Affordable Care Act (ACA) imposes a penalty on "applicable large employers" starting in 2014 (changed to 2015 by the Administration). An ALE is an employer with 50 or more full-time or full-time equivalent workers. A full-time worker is one who works on average, 30 hours per week, or 130 hours per month.

There have been proposals to increase the threshold from 30 to 40, including this week - H.R. 30 of the new 114th Congress. Full-time employee is relevant in determining if an employer is an ALE, but more significantly, it is relevant in describing which employee the ALE has to offer coverage to (as well as the employee's dependents up to age 26), in order to avoid the employer mandate penalty (IRC Section 4980H).  An ALE only owes a penalty if one of its full-time employees obtains a Premium Tax Credit. The change from 30 to 40 means there are fewer employees the ALE has to offer coverage to and reduced exposure for such employees obtaining a PTC.

Sounds good for the ALEs.  But, the cost to the government could be high.  With fewer employees offered coverage from their employer (who wants to avoid a penalty), more employees are eligible to obtain Medicaid or insurance in the Marketplace (federal or state exchange).  Many of those getting insurance in the Marketplace would be eligible for a PTC.  Of course, when the employer offers coverage and subsidizes it (also necessary for the ALE to fully avoid penalty exposure), there are costs in that the employer deducts what it pays for the insurance and that income is excluded by the employee.

The Congressional Budget Office has a report on H.R. 30 which goes into more details on this issue. Per CBO's summary: "CBO and JCT estimate that enacting H.R. 30 would increase budget deficits by $18.1 billion over the 2015-2020 period and by $53.2 billion over the 2015-2025 period. The 2015-2025 total is the net of $66.4 billion in additional on-budget costs and $13.2 billion in off-budget savings (the latter attributable to increased revenues)."

Other considerations - I've seen news reports in the past about some employers reducing hours of those working on average, 30 or more hours per week, so that employers do not have to offer them coverage. These employees may also favor H.R. 30. But, part of the ACA's "shared responsibility" aspect is to have employers (at least ALEs) share in the cost of health insurance.

What do you think?