Are Companies Bluffing on Health Benefits?

There's no evidence of employers reducing work forces because of health-care reform, and logic suggests they won't next year either, a new study says.
David McCannJuly 26, 2013

Opponents of the Affordable Care Act have repeatedly labeled it a jobs killer, and many small employers have threatened to reduce their work forces (or say they already have) because of it. Those just above the 50-employee threshold over which they must offer workers health insurance or pay a tax penalty could cut back to just below that number. Also, employers could reduce some employees’ hours to less than 30 per week so that there would be no penalty applicable to those workers.

As logical as those arguments may sound, there is no evidence the ACA will create a statistically significant reduction in employment, according to a new study by the Center for Economic and Policy Research.

CEPR bills itself as a nonpartisan research center, although its positions tend to be left of center. But when it comes to logic, CEPR’s take on the ACA and employment seems pretty sound. 

The one-year delay in enforcement of the ACA’s employer-mandate provisions, announced by the Obama administration on July 2, means employers won’t be subject to penalties in 2014. Before that change, employment in 2013 was to have served as the basis for penalties assessed in 2014. Therefore, assuming employers were well informed on that point, if they were bent on cutting back on staff or hours they would have started doing so this year. 

But the number of employees working 26 to 29 hours per week actually was slightly lower — about a 10th of a percent — in the first four months of 2013 compared to the year-earlier period. The percentage of employees working in that hours range declined by a similarly small fraction. And, importantly, such employees account for only 0.6 percent of the U.S. work force.

The number of such workers did, though, shoot up dramatically (13.5 percent) in April of this year compared to the previous April. That could be an anomaly, or it could suggest that employers finally started getting concerned about the possibility of paying penalties next year.

CEPR gleaned the numbers from the Current Population Survey, a joint effort of the Bureau of Labor Statistics and the Census Bureau.

“While this drop is not close to being statistically significant, the change is in the wrong direction for the ACA as a jobs-killer story,” CEPR said.

CEPR acknowledged that it’s too early to assess claims that employers are staying below the 50-employee level, since data by employer size in 2013 is not yet available.

“However as a practical matter it is implausible that the behavior of [employers with slightly more than 50 employees] could have any noticeable effect on employment growth,” the Center wrote. “It is unlikely that more than 1 percent of potential employment growth would be in firms that are near this cutoff. Furthermore, most of these firms would already be providing health care insurance for their employees and therefore need not be concerned about the sanctions in the ACA.”

According to a survey by the Kaiser Family Foundation, 94 percent of employers with more than 50 employees provide health benefits.

The CEPR paper added, “If some number of firms actually are limiting or reducing employment to stay below the 50 worker cutoff then the impact would be too small to be noticed in the economy as a whole.”