Employers with large part-time and low-wage populations —especially retailers — are more likely to take measures in order toavoid triggering a costly requirement to provide health carecoverage to employees that used to be ineligible.

According to a survey released Wednesday from consulting firmMercer, 67% of retail/wholesale employers expect they'll be makingchanges to their workforce structure so they can dodge a coverageeligibility requirement that's part of the Patient Protection andAffordable Care Act.

Under that requirement, in 2014, employees working 30 or morehours per week will be considered full-time and therefore must beoffered employer-based health care coverage.

If employers don't offer health care and they have 50 or morefull-time employees, they'll have to pay a $2,000 penalty for eachworker that isn't offered coverage and receives a subsidy topurchase a policy within a state-run health insurance exchange(employers won't have to pay a penalty for the first 30 workersthat receives a subsidy).

Those purchasing health insurance through an exchange areeligible for a premium subsidy if their income falls between 100%and 400% percent of the federal poverty level.

Employers with part-time and low-wage populations expect thathealth care reform requirements will push up costs by at least 3%in 2014, and another third don't yet know what the impact willbe.

“With health benefit costs already rising at twice the rate ofgeneral inflation, an additional increase of 3% or more will bevery tough for employers to absorb,” said Sharon Cunninghis, leaderof Mercer's US Employee Health & Benefits business.

Walmart, the largest retail employer, stirred backlash last yearbecause it started refusing health care to part-time employees whowork less than 24 hours per week and raised premiums for full-timeemployees.

While there is no penalty if a part-time worker (someone workingless than 30 hours per week) receives an exchange subsidy, thenumber of part-time workers can affect whether an employer isconsidered a “large employer.”

For example, if a firm has 35 full-time employees and 20part-time employees who all work 24 hours per week (96 hours permonth), the part-time hours would be divided by 120, and would beequivalent to 16 full-time employees.

With 51 “full-time” employees, that company is now considered alarge employer. If the 35 actual full-time employees receive asubsidy for a health care exchange plan, that employer will be haveto pay a $10,000 penalty.

On top of the eligibility requirements, the health care coveragethat employers are required to offer will face greater scrutiny tomeet certain requirements. The cost of premiums, for example, can'texceed 9.5% of the employee's income for self-only coverage.

Employers also won't be meeting requirements if their plan paysfor less than 60% of covered expenses. The Congressional BudgetOffice estimates about 1 million individuals per year will enrollin an exchange plan and receive a credit because their employer'splan was unaffordable.

“Extending coverage to more employees will be a significant newexpense for these employers,” said Tracy Watts, US health carereform leader for Mercer. “Especially because other provisionsregulate how much an employer can require employees to contributeto the cost and how good the coverage must be.”

Additionally, Mercer says, in companies where pay is low,employees who are eligible for coverage are more likely to opt outof enrolling. For example, among large wholesale/retail and healthcare employers, opt-out rates average 19% and 18%, respectively,compared to just 8% percent among transportation, communication andutility companies, where pay is higher.

Once the individual mandate goes into effect – which willrequire all individuals who can afford coverage to obtain it (orpay a penalty) – employers with high opt-out rates could experiencea significant increase in enrollment.

Mercer also points out that employers that were counting on someof their low-paid employees qualifying for Medicaid when it expandsto include individuals with household income less than 133% of thefederal poverty level may have to rethink their plans in light ofthe Supreme Court ruling that makes it easier for states to opt outof the expansion. A fifth of survey respondents havebenefit-eligible employees earning less than 133% of FPL; inindustries with large part-time populations this rises to as muchas 50 percent.

“Because state Medicaid eligibility already varies greatly, it'sdifficult to predict what states will do about expanding theirprograms to more individuals, and the impact of their decisions onemployers,” said Branch McNeal, leader of Mercer's GovernmentConsulting business.

The Mercer survey highlights the scope of outcomes betweenvarious industries. For example, few survey respondents – 6% –believe it is likely that they will drop their medical plans afterthe public insurance exchanges come online. This rises to 9 percentamong retail and hospitality employers.

And while almost 70% of retail/wholesale employers will try toavoid the 30-hour per week threshold, 41% of manufacturingemployers will likely to take this approach.

“Sometimes lost in the furor surrounding health reform is thefact that the Patient Protection and Affordable Care Act (PPACA)will affect some employers far more than others,” Mercer said in astatement.

Preparing for reform:

• Employers have a lot to do to prepare for reform – especiallythose that were waiting to develop a strategy until the SupremeCourt decision (56% of survey respondents). While 11 percent willcontinue to wait until after the November elections, most will nowmove ahead.
• Short-term, employers need to produce and distribute summariesof benefits and coverage (SBCs) and more than a third ofrespondents (36%) say they haven't yet begun or are behindschedule.
• Employers are doing better with other near-term tasks, includepreparing for 2012 W-2 form reporting in early 2013, implementingthe new $2,500 cap on health care flexible spending accountcontributions and implementing coverage with no cost-sharing forwomen's preventive services under non-grandfathered plans – aboutthree-fourths say these tasks are on schedule or complete.

This article was originally posted on BenefitsPro.com, a sister site ofCredit Union Times.