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Retailer Target to eliminate health plan for part-timers, offer subsidy for exchange coverage


By Paul Demko
Posted: January 22, 2014 - 3:15 pm ET
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Target Corp. plans to eliminate its health plan for part-time workers and help them buy coverage in the exchanges, joining other large retailers in a move that experts believe is good for many employees.

Target detailed the change on its website Tuesday. Instead of offering employer-based coverage, part-time workers will receive a $500 subsidy from the company that they can use to purchase coverage on their own.

Fewer than 10% of its part-time workers, who average 32 hours a week, are purchasing coverage through its current program, and those workers may be eligible for better deals through the state and federal exchanges, the company said.

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A Target spokeswoman declined to provide details on how much part-time employees are asked to contribute to the employer-sponsored plan or say whether the benefits in the plan conform to the requirements of the Patient Protection and Affordable Care Act. The company did say, however, that it believed continuing the plan could disqualify part-time workers from getting subsidies available for coverage in the exchanges under the reform law.

Paul Fronstin, director of health research at the Employee Benefits Research Institute, agrees that employees may be better off getting insurance through the exchanges. “It's not easy to tell a worker cutting your benefits is good for you, but in some cases it might be,” he said.

Under the federal healthcare reform law, companies with more than 50 full-time employees, defined as those working at least 30 hours per week, will be required to provide coverage to those workers. Implementation of the employer mandate has been delayed until 2015.

Still, employers have been adjusting their approach to benefits in response to the Affordable Care Act. Target is not alone in eliminating health insurance benefits for part-time workers. In September, Trader Joe's announced that it was eliminating insurance coverage for employees that work fewer than 30 hours per week and providing them with $500 subsidies instead. Likewise, Home Depot is directing part-time workers to the exchanges to purchase coverage.

Target is working with the benefits consulting firm Towers Watson to help employees navigate their options on the exchanges. Christopher Condeluci, an attorney at the law firm Venable who worked with Republicans on the Senate Finance Committee when the ACA was drafted, expects more companies to take similar steps now that most exchange websites are functioning well. “At the end of the day, the part-time folks, the low-income workers are better off going to the individual market exchanges and getting the subsidies,” Condeluci said.

Follow Paul Demko on Twitter: @MHpdemko


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