Trader Joe's made a very big announcement this week, one that had nothing to
do with Two-Buck Chuck.
The grocery chain, in a
memo obtained by the Huffington Post, told part-time employees that it would
end their health insurance benefits for employees who work less than 30 hours a
week, sending them instead to the new public insurance marketplaces with an
extra $500 to help purchase coverage.
gDepending on income earned outside of Trader Joefs, we believe that with the
$500 from Trader Joefs and the tax credits available under the ACA, many crew
members should be able to obtain health-care coverage at very little, if any,
net cost,h the company said Thursday in a statement to Bloomberg.
So what does this decision by Trader Joe's tell us about the Affordable Care
Act? A few things.
Before we get to that, though, its worth thinking about why Trader Joe's or r
any employer offers health insurance right now.
P
While health benefits are expensive, companies typically offer them to stay
competitive. A robust health plan can go a long way in wooing potential
employees especially when most of the market doesn't offer part-time workers s
the opportunity to buy coverage.
A healthier workforce can also have a benefit to a company, if they have
fewer workers taking sick days and increasing productivity. The tax code gives
companies yet another reason to offer benefits: Companies can pay for health
insurance with pre-tax dollars, making compensation in the form of these
benefits a better deal than the post-tax salaries they pay.
These incentives pre-dated the Affordable Care Act and they will outlast the
law, too. The health-care law does add in a whole bunch
of other incentives, which could change how employers think about the
benefits they offer workers. It requires employers to provide health insurance
to all full-time workers if they employ more than 50 people. That increases the
incentive to provide coverage.
There are forces working in the opposite direction, too, that decrease
employers' incentives to provide health coverage. The health law will eliminate
pre-existing conditions, meaning that anyone who does lose coverage will have an
option elsewhere, which is not the case today. It also provides subsidies for
purchasing private insurance or, for lower-income workers, the opportunity to
enroll in Medicaid.
The insurance market under Obamacare, in other words, is supposed to be a
friendlier one than what exists right now. And that's what Trader Joe's seems to
be betting on with its move: that its workers will see similar options without
the grocery store footing the full bill.
Whether this will be true is hard to game out at this point. The Huffington
Post did talk to one Trader Joe's worker who estimated that she earned about
$20,000 and currently pays $70 a month for a pretty robust health plan. Trader
Joe's plans to kick in $500 for each employee, or about $40 per month. So we're
looking at a total of $110 to spend on the marketplace each month, if spending
holds to the same level as what Trader Joe's workers pay right now.
The rate data we have so far (largely from the Kaiser Family Foundation)
suggest that comparable premiums will be available for someone earning
$20,000. Using a calculator that Kaiser helped build, it shows that a
25-year-old who makes that much here in the District would pay $85 for a
middle-of-the-road plan and $26 for the bare-bones option. Premiums are a bit
higher for those who are older, and a little lower for younger subscribers.
As for what Trader Joe's decision means for the health-care law, that's not
totally clear either. On the one hand, it likely makes the health law more
expensive: Trader Joe's is essentially shifting the costs it used to pay for
health insurance onto the federal government. On the other, bigger marketplaces
are good for the health law. More subscribers make it more likely that insurers
will want to sell and, if Trader Joes' employees tend to be younger, they'll
likely help hold down the cost of premiums there.