News: CJ Exclusives

Counties Cut Hours, Jobs Due To Obamacare

Governments and businesses socked with higher costs by federal law

Robeson County reduced the workweeks for 367 part-time employees and capped them at 25 hours weekly to avoid higher health insurance costs associated with mandates in the Patient Protection and Affordable Care Act.

Onslow County raised taxes, and taxpayers shelled out an additional $1.2 million the past three years to meet the escalating costs of compliance with Obamacare, as the national health care reform act is commonly known.

And McDowell County scrapped its retiree insurance plan for new employees because it became too expensive to maintain under regulations mandated by Obamacare.

Those are among the findings of a partial survey of county and municipal governments conducted this month by Carolina Journal. It showed public workers being socked with fewer hours and decreased income, higher employee and government costs for health insurance, and local governments being hammered with a variety of Obamacare taxes.

“I think that’s probably characteristic of what you see across the country,” said Devon Herrick, senior fellow and health economist at the Dallas, Texas-based National Center for Policy Analysis. Offering “a lavish benefit package” to a 30-hour worker “is cost-prohibitive.”

Herrick conducted a study this past summer on the effect Obamacare has had nationwide on employers cutting hours of part-time workers. At the 30-hour-per-week threshold, Obamacare classifies an employee as full-time and eligible for employer-provided insurance. Cutting hours below 30 avoids that trigger.

“I was impressed by the number of colleges, and counties, and small towns, and cities that are doing that,” Herrick said.

“We tend to hear about how evil businesses are. Well, it’s not just businesses that are having to find a way to cut back hours” to ensure employees don’t qualify for a mandatory benefit that pushes compensation to a level the county can’t afford, or beyond what the service provided is worth, Herrick said.

“Weekly hours have been reduced for part-time employees to a maximum of 25 hours per week,” said Jason King, Robeson County assistant county manager. Of the county’s more than 1,100 employees, 367 are part-time.

In addition to scaling back hours, insurance costs have risen 9.85 percent due to Obamacare, deductibles under its health plan increased from $2,500 to $3,000, and the primary care co-pay jumped from $25 to $30, King said.

“Some part-time employees worked up to 32 hours per week. We have reduced them to no more than 19 hours per week and are hiring more part-time staff to accommodate this change,” said Vance County Human Resources Director Argretta Johen. The reduction affected about 75 employees.

The county has not calculated the impacts of higher insurance costs and doesn’t anticipate knowing the effect until the policy comes up for renewal.

Those examples show that Obamacare is more likely to hurt than help low-wage, part-time workers, Herrick said.

“The Affordable Care Act essentially, naively, said, ‘We can’t have these people working 30 hours or 32 hours and not getting benefits,” Herrick said. That was naïve, he said, because employers predictably cut back hours.

“They still don’t get benefits, but they’re getting less income,” Herrick said.

Onslow County Manager Jeffrey Hudson said his county made changes to the benefit plans offered to employees, including increasing employee out-of-pocket deductibles and co-insurance.

“In addition, the county required a tax increase in July of 2014. Had the county not incurred $1 million in health care increases over the last few years, a portion of that tax increase would not have been necessary,” Hudson said.

McDowell County Manager Chuck Abernathy said his county offered a retiree insurance policy that was available if certain conditions were met.

“We had a cap of $100,000 in claims that would be paid. We are self-insured,” Abernathy said. “The new law eliminated caps for retiree insurance, making the liability for the employer without any protection. We eliminated retiree insurance for all new hires after March 1, 2009, because of this change in the law.”

Pitt County Manager Scott Elliott said the county increased its out-of-pocket expense from $2,500 to $3,000 per participant.

The county will be required by Jan. 15, 2015, to pay a transitional fee of $63 for each of its 1,382 participants as part of Obamacare’s Transitional Reinsurance Program, which shifts those fees to insurance companies covering high-risk individuals on the exchange. For Pitt County, that equates to $87,066.

Brunswick County Human Resources Director Scott Milligan said no position or hour cuts are being considered, but costs are rising due to Obamacare.

Those include $108,171 for the transitional fee this year, $86,105 last year and this year for increased preventive services for women’s health care, and $155,000 estimated in increased co-pays and out-of-pocket maximum payments.

Granville County Manager Michael Felts said that even with changes in their benefit plans, premiums rose by an estimated 10 percent, “with some sources calculating upwards to 20 percent premium increase changes.” The county has not estimated the cost of this change, and other direct impact costs of Obamacare have not been calculated.

Wake County will incur $32 million in health insurance expenses in 2015. About 3 percent of that is Obamacare costs, including $277,772 in transitional reinsurance fees, according to information provided by the county. No employee or hour cutbacks are planned.

Others say they have seen no need to make changes.

“We do not anticipate the need for any changes in personnel or additional costs to comply with the law,” said Warren County Manager Linda Worth. “We will not know if premiums, deductibles, and co-pays will change until we begin the health insurance renewal process that normally takes place in the spring.”

“The City of Durham has not and is not considering any changes … as a result of ACA,” City Manager Tom Bonfield said of employee hours or higher costs.

Larry Johnson, Rockingham County Health and Human Services director, said there have been no changes in Rockingham County employment.

Dan Way (@danway_carolina) is an associate editor of Carolina Journal.