target

Is Target in the healthcare vanguard? (Steven Senne/AP / January 22, 2014)

The big noise on the health insurance front today was sounded by Target, which announced via a corporate blog that it's ending health insurance for its part-time workers. Instead of signing up for a company plan, they're encouraged to use the healthcare exchanges set up through the Affordable Care Act

In some quarters this is being spun as a drawback of the act, or as a way for a big corporation to wriggle out of its responsibilities to its workers. "Target Axes Some Workers' Health Care, Blames Obamacare," was one headline in the Huffington Post.

Not exactly. As Trader Joe's did in September when it took a similar step, Target is suggesting that most of the affected workers will do better under the exchange system than they were with company-sponsored insurance. Target is probably right.

We say "probably" because the Minneapolis retail giant refused our request for data that would help nail down the pluses and minuses. We asked for the average wage of part-time employees affected by the change in policy; the number of part-timers; their average hours per week; and the benefits and premiums they were eligible for up to now. (The new policy takes effect April 1.) Target said none of that information is public.

Target also said workers averaging more than 32 hours a week would remain eligible for its company-sponsored health plan. That's curious, because the ACA requires big employers to provide coverage for full-time employees, who are defined as those working 30 hours a week or more. Target refused to clarify the discrepancy, though it's proper to note that the employer mandate doesn't kick in until next year. 

What Target does say is that fewer than 10% of its "team members" participate in the part-time health plan. Obviously, without knowing what ratio of its 360,000 employees are part-timers, it's impossible to know how many enroll. But the company did say that the majority of its part-timers don't.

The company also says it will pay $500 to all part-timers who are currently members of the health plan and therefore will be losing coverage. That's a one-time check and only for those who already are enrolled in the health plan.

Trader Joe's was rather more forthcoming about its policy. The company said there would be no change in coverage for more than 77% of its "crew members." (By the way, what's with this aversion by retailers to calling employees "employees"?) TJ made public a couple of examples of how its new policy would affect workers with selected wage and hour characteristics. Its $500 payment evidently covered all part-timers, not just those already getting company healthcare.

Judging from the Trader Joe's memo and the scanty information Target is divulging, it's reasonable to conclude that many employees actually may do better. Consider a 32-year-old single mother with one child earning (to be liberal) $20 an hour and working 29 hours a week.

She'd pull down $30,160 over a full year. According to the Covered California exchange, she'd be eligible for a silver health plan with good benefits for as little as $120 a month for herself (net of the government subsidy; her child would be covered at no charge by Medi-Cal, which is California's name for Medicaid). A bronze plan with higher co-pays would cost as little as $86. 

Since we don't know what she'd be paying for Target's plan or what it covers, it's impossible to say for sure if she'd be doing better. But it's unlikely that Target's plan for part-timers covers more than an exchange silver plan or costs less. Trader Joe's offered as an example a (supposedly) real-life single mother who was paying $166.50 per month for the company plan, and could find "almost identical" insurance on the exchange for $69.59. That doesn't sound unrealistic. 

Some workers whose household incomes place them over the subsidy threshold (400% of the federal poverty line) but haven't had access to healthcare except through Target may end up paying more. 

What's happening under the surface, of course, is that these companies are shifting some of their own employee benefit costs to the taxpayers, who are providing the applicable subsidies.

But that's not a bug in the Affordable Care Act; it's a feature. Its goal was to get more people covered, in part by spreading the cost society-wide. And that's what's likely to happen. The cost of employee healthcare for part-time workers was on the long road to unaffordability long before enactment of the law. 

There are hints in both the Trader Joe's and Target announcements that premiums were on the way up and benefits on the way down, presumably to make the insurance less palatable to part-timers and therefore less of a cost burden to the retailers. The consequence was sure to be a rise in the uninsured population.

The missing piece of the puzzle, still, is what the companies do with the money they save. If they use at least some of it to pay their workers better, that's a net gain for everyone. If they merely shovel it out to top management and shareholders, then they've gotten something for nothing, and acted shamefully.

One other factor in all this deserves notice. Both companies observe that because of a quirk in the ACA, under some circumstances eligibility for employer health coverage for a family member disqualifies the whole family for the government subsidy. As a result, eliminating the eligibility may be advantageous for some families.

That disqualification, however, is a definite bug in the ACA, for which a congressional fix is urgent. The message is clear to all those conservative poseurs who claim Obamacare is flawed: If you're really committed to better healthcare for your constituents, let's see you fix this one. 

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