Then House of Representatives Speaker Nancy Pelosi, in pushing for the Affordable Care Act, aka ObamaCare, said, "We have to pass the bill so that you can find out what's in it." We're finding out what's in it and we're also finding out some unintended, but totally predictable, consequences. In a speech I gave in Dallas in October 2010, I said, "Look for companies that have a few more than 50 employees to cut their number of employees to the magic number of: 49." [The talk is here. Go to the 17:00 point.]
Sure enough, one consequence is an increase in contracting out to avoid the 50-person threshold. Another ominous consequence for certain segments of the labor force is a shift to part-time work or a reduction in the amount of part-time work by current part-time employees so that the part-time employees don't count as full-time. In the last week, the Wall Street Journal had two excellent stories on these.
During her two-plus years in business, Elizabeth Turley has steadily recruited new employees for her apparel company, Meesh & Mia Corp., to keep pace with its rapid growth. But this year could be different. Instead of increasing her staff, she plans to hire independent contractors for tasks that can be outsourced, such as marketing and product development.
Her reason? Meesh & Mia is on the cusp of having 50 full-time employees. If the company hits that threshold, it will have to provide health coverage that meets government standards or potentially pay a penalty.
Why adjust now rather than in 2014 when that part of the law kicks in? Continue:
Even though the rule doesn't go into effect until early 2014, a business could be subject to the so-called employer mandate if, during 2013, it averages 50 or more full-time equivalent employees, according to recently released regulations from the Treasury Department and the Internal Revenue Service.
Many small-business owners haven't yet realized that the way they structure their firm in 2013 could determine their status under the law in a year's time.
The government issued the little-noticed regulatory guidance on Dec. 28. Ms. Turley says she wasn't aware of the rules until a Journal reporter informed her.
To avoid the health-care law's penalties, many employers are considering hiring only part-time employees or deliberately curbing growth so that they have no need to hire.
The Affordable Care Act requires large employers to offer a minimum level of health insurance to employees who work 30 hours a week or more starting in 2014, or face a penalty. The mandate is a particular challenge for colleges and universities, which increasingly rely on adjuncts to help keep costs down as states have scaled back funding for higher education.
A handful of schools, including Community College of Allegheny County in Pennsylvania and Youngstown State University in Ohio, have curbed the number of classes that adjuncts can teach in the current spring semester to limit the schools' exposure to the health-insurance requirement. Others are assessing whether to do so, or to begin offering health care to some adjuncts.
In Ohio, instructor Robert Balla faces a new cap on the number of hours he can teach at Stark State College. In a Dec. 6 letter, the North Canton school told him that "in order to avoid penalties under the Affordable Care Act...employees with part-time or adjunct status will not be assigned more than an average of 29 hours per week."
Mr. Balla, a 41-year-old father of two, had taught seven English composition classes last semester, split between Stark State and two other area schools. This semester, his course load at Stark State is down to one instead of two as a result of the school's new limit on hours, cutting his salary by about a total of $2,000.