Thursday, May 9, 2013

CA Lawmakers Seek to Make It Illegal to Reduce Worker Hours Below 30 a Week to Avoid ObamaCare Fines

by Craig Gottwals, Attorney at Law
A version of this article is also posted at Cal Watchdog

Law would also penalize employers whose wages are too low to keep employees off of Medi-Cal.  

In the state that seemingly takes pride in demonstrating its economic ignorance and disdain for all things private, our legislature is working to double down on ObamaCare.  As the first state to establish an ObamaCare Exchange, California has now set a new bar in government driven healthcare ideology with what some have referred to as CaliCare.

The California legislature is presently advancing A.B. 880 that would make it unlawful for employers to reduce workers’ hours below 30-hours a week for the purpose of avoiding ObamaCare’s employer mandate penalties.  Similarly, the proposed law would fine employers if the wages they pay are not high enough to keep workers off Medi-Cal rolls.

AB 880's monetary penalty is written purposely vague but sure to be painful to business.  The proposed penalty on employers is based on 110% of the average cost of health care coverage, including both the employer’s and employee’s share of the premium.  According to the Kaiser Family Foundation, the national average cost for individual health care coverage in 2012 was $5,615 and family coverage was $15,745. It is unclear whether AB 880 sets the penalty level at the individual or family level of health care coverage but even if it were set at the lower individual level it would be 110% of $5,615 or a cool $6,176.50 per employee in 2013.  That is over three times the federal penalty for not providing healthcare to an employee under PPACA.  

And whereas most tax thresholds and the Alternative Minimum Tax conspicuously are not adjusted for inflation; rest assured, the state will make sure business penalties are.  "The amount of the employer responsibility penalty shall be adjusted annually to reflect changes in the average cost of coverage provided by large employers to their employees." (A.B. 880, Article 7, section 14199.1, pg. 22 of the below linked PDF.)  Healthcare costs have increased 170% over the past decade.  That will make for one steroid-induced penalty for state rulers to plunder in upcoming years.  Perhaps we can take the Bullet Train to new state-funded clinics?  

The stated goal is to prod large businesses to offer health insurance by fining them more than the average cost of providing coverage.  Money raised by AB 880 is meant to increase Medi-Cal provider rates, and to subsidize state costs for it.  

The law would apply to private employers with 500 or more employees in California and for employees working as few as 8 hours per week.  I can just see it now: help wanted signs advertising part time work available at 7.9 hours per week.  

The proposed law also provides, conveniently, "'large employer' shall not include a state, city, county, city and county, district or any other governmental employer. ... An employer responsibility penalty shall not be incurred by a state, county, city, city and county, district, or any other governmental entity." (A.B. 880, Article 7, section 14199.1, pg. 21 of the below linked PDF.)

The California Chamber of Commerce has already identified the bill as a “job killer,” stating that it will “significantly hamper an employer’s ability to manage its workforce.”

UPDATE on 7/1/13: Los Angeles Times: Bill To Fine Big Firms With Workers On Medi-Cal Comes Up Short
A California proposal to fine large companies that have workers on Medi-Cal came up short in an initial vote in the Assembly amid strong business opposition. The proposed fines could reach about $5,000 per full-time employee who receives Medi-Cal, the state Medicaid program for the poor. The bill, AB 880, garnered 46 votes in the 80-member chamber Thursday, short of the 54 votes, or two-thirds majority, needed. The measure could come up for reconsideration as early as next week.