January 24 2014
Patrice J. Lee
Target is in the news again this week and it’s more bad news. This time it’s not about a massive data breech, but that the company is dropping healthcare coverage for its part-time workers. The cause: ObamaCare.
In an announcement on its corporate blog, Target explained that because of “the transforming health care landscape” which provides new options for coverage they have decided to discontinue part-time health insurance coverage for their stores’ part-time workers, beginning April 1, 2014.
Jodee Kozlak, executive vice president of Human Resources at Target, explains:
Health care reform is transforming the benefits landscape and affecting how all employers, including Target, administer health benefits coverage. Our decision to discontinue this benefit comes after careful consideration of the impact to our stores’ part-time team members and to Target, the new options available for our part-time team, and the historically low number of team members who elected to enroll in the part-time plan.
We recognize this change may be better for some and also may cause disruption for those who previously elected to enroll in this benefit.
Target joins other major American companies which have dropped healthcare coverage to their (part-time) workers including Trader Joe’s, Home Depot, and national drugstore chain Walgreen’s. Interestingly, they note that in the choice between cutting hours and cutting health care coverage, Target chose to cut coverage. Retailers, along with restaurant and hospitality companies, are bracing from big cost increases under the new insurance mandates due to their sizable workforces.
Just how many employers can we expect to drop coverage? McKinsey estimated a third of employers are likely to drop coverage, while Deloitte predicts it will be about ten percent. Whether one in ten employers or one in three, we’re talking about millions of American workers who will receive cancellation notices and learn from corporate leadership that they will have to look elsewhere for healthcare coverage.
Unintended consequences of the Unaffordable Care Act strike again. The collectivist philosophy that drives policies like ObamaCare ignores basic economic principles and human nature. People and organizations respond to incentives and penalties.
Most companies currently offer coverage voluntarily because it helps them recruit and retain workers. However, they may be encouraged to drop those plans if the law forces them to provide more generous benefits than they do at the moment or if they conclude that the cost of penalties for not providing insurance could be less expensive than paying for benefits.
With the employer mandate delayed an additional year, companies are sitting on the sidelines observing how the current enrollment mix in the healthcare exchanges will affect pricing to make their decisions. And as we’ve been reporting, young, healthy Americans are sitting out of the ObamaCare exchanges. This doesn’t bode well for a system that requires the young and healthy to bear the costs of older and sicker patients.
Can we expect more employers to drop coverage for their workers? Undoubtedly. The question is who will be next?