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Adding to the ranks
Some employers shifting workers to state exchanges

By Melanie Evans
Posted: September 28, 2013 - 12:01 am ET

Employers and workers are making new calculations that likely will add part-time workers and those who have lost their jobs to the 7 million shoppers expected to buy federally subsidized coverage on the exchanges for 2014.

Some employers already are shifting workers into the state exchanges. Grocery chain Trader Joe's and retailer Home Depot announced in October that they would no longer offer health benefits to part-time workers.

Observers say these moves by employers foreshadow a larger shift away from employer-based coverage and toward coverage through the state exchanges. They could also increase federal costs for premium subsidies targeted to lower- and moderate-income people.

This type of move is one strategy by employers to lessen healthcare benefit costs and respond to new regulations in effect next year under the Patient Protection and Affordable Care Act. The law requires large employers to provide health insurance to employees who work 30 hours a week or else pay a penalty. Though regulators will not enforce that rule until 2015, employers are moving to change benefits regardless as the law's soon-to-open exchanges create a new alternative to job-based insurance.

Employers' willingness to consider exchanges as an option for part-time workers is a “huge shift,” said Paul Fronstin, a senior research fellow with the Employee Benefit Research Institute. About 4.5 million part-time workers, or 16%, have health benefits through an employer, according to the institute's data.

Trader Joe's said part-time workers who no longer receive benefits would receive $500 a year to buy exchange coverage. Many of these part-timers will qualify for federal premium subsidies. “We estimate that over 70% of them will pay less for comparable insurance when they switch to a healthcare exchange plan,” the company said in a statement.

Home Depot's switch will affect 20,000 employees who will continue to receive dental, vision and disability coverage but no longer will be covered by a mini-med health plan, according to Stephen Holmes, a spokesman for the company. “But the new marketplace will offer them more options where they can shop for comprehensive medical coverage,” he said. He declined to say whether the company will increase workers' wages to offset employees' premium costs.

Fronstin said employees stand to benefit if they receive subsidies for buying plans on the exchanges that are greater than the tax exclusion they receive for employer health benefits. Workers also are likely to have more plan choices, and they won't be tied to a job for the health benefits.

But over time, workers may pay more for insurance if premium prices accelerate faster than wages, he said. Employers previously absorbed most of the premium increases.

Employers also stand to benefit from the new exchanges in other ways. Recently laid off workers may opt for exchanges instead of COBRA. Such workers who are willing to pay the full premium for COBRA coverage often have higher-than-average medical costs, raising health benefit costs for employers, Fronstin said.

The exchanges are expected to be an attractive option for these laid-off workers, who will have more plan options. In addition, they likely will have lower premiums and be eligible for federal premium subsidies.

Follow Melanie Evans on Twitter: @MHmevans

Grocery chain Trader Joe's is switching its part-time workers to the exchanges.

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