Solving Unintended Consequences of the Affordable Care Act
The SAW Act repeals the current ACA definition of 30-hour full-time employment and restores the widely accepted 40-hour threshold.
Any time a comprehensive bill, such as the Affordable Care Act, is quickly rushed through Congress, there are bound to be unintended consequences. Within that bill, perhaps no provision had a more damaging unintended effect than the employer mandate with its definition of “full-time employment” set at 30 hours.
The employer mandate was, by and large, meant to be a revenue-generating piece of the bill more than a health care coverage piece. The 30-hour threshold wasn’t established because it would provide coverage to the greatest number of employees; it was chosen because the taxes and penalties on employers at that level brought in enough money to help give the bill a deficit-reducing score.
The Cost of Compliance
The unintended result of this policy is that in many cases it now makes more business sense − especially at a time when economic growth remains sluggish − for employers to reduce hourly employees to 29 hours or less. And this isn’t just a case of trying to manage profit margins. Many cash-strapped local governments, school systems and universities are making similar decisions because the cost of compliance is too burdensome.
A recent study by the Univ. of California-Berkeley estimated that as many as 2.3 million hourly employees will see their hours, and their wages, cut. For hourly workers going from 40 hours down to 29, the net result is the loss of more than a full week’s worth of pay each month, or three months lost annually. Some of these workers who also depend on overtime pay could see even deeper cuts to what they bring home.
This brings up another potential unintended consequence of the “30 hours is full-time” provision: While federal law makes reference to a 40-hour work week being the threshold for some benefits (i.e., time-and-half overtime pay), the term “full-time employment” has never been defined. That means the ACA marked the first time that “full-time employment” has ever been formalized, and it was set at a level inconsistent with existing labor law, history and cultural convention. The potential for a future activist court to cite this section of ACA as precedent in other labor law cases is very real, and would have implications far beyond health care.
Restoring the 40-hour Threshold
To help preserve the hours and wages of hourly employees, remove the burdensome costs on employers, and to avoid this issue becoming a football for litigation, I recently introduced H.R. 2575, the Save American Workers Act. The SAW Act simply repeals the current ACA definition of 30-hour full-time employment and restores the widely accepted 40-hour threshold.
Less than a week after the bill was introduced and quickly amassed 114 co-sponsors, the Treasury Department announced it would not enforce the employer mandate in 2014, the year it was supposed to go into effect. While merely delaying this aspect of the law until 2015 might make the law less painful in the short-term, it does nothing to address any of the long-term structural problems this bill created and exacerbated. As long as those problems exist, I’ll continue fighting to replace the 30-hour definition with the historical norm of 40 hours.
You can learn more about the SAW Act at http://toddyoung.house.gov/save-american-workers.
By U.S. Rep. Todd Young. The author is the U.S. Representative of Indiana’s Ninth Congressional District and a member of the House Ways & Means Committee.