Will Proposed Obamacare Fines Help or Hurt California Workers?

By Kelley Weiss, CHCF Center for Health Reporting

A proposed law seeks to close the so-called "Walmart Loophole." (Justin Sullivan/Getty Images)
A proposed law seeks to close the so-called "Walmart Loophole." (Justin Sullivan/Getty Images)

For many businesses Obamacare is downright intimidating. The requirement to provide coverage to full-time employees or potentially face thousands of dollars in fines is what’s really worrying some large companies.

Most employees at large businesses already receive health insurance through their employer. But there are still some exceptions.

Barbara Andridge is a sales associate at a Walmart near Sacramento. She’s not sure if she’s eligible for the company’s health insurance program because her hours are all over the map -- from eight hours one week up to 36 hours the next.

To qualify for company benefits she says she’d have to be working at least 30 hours per week.

“I really had to sit down and think about my hours and if I’m going to have enough hours to qualify to have health care all year,” Andridge says.


With no guarantee of hours Andridge decided to enroll her six-year-old son in Medi-Cal, the government health insurance program for low-income Californians. Andridge plans to apply for herself soon as well.

Some health care advocates are concerned there will be even more employees like Andridge applying for Medi-Cal once Obamacare kicks in next year. They fear companies will limit hours for workers just to avoid having to pay for their health insurance.

“Employers should not be able to skirt their responsibility simply by exploiting a vulnerability in the law,” says Steve Smith with the California Labor Federation.

Assemblyman Jimmy Gomez (D-Los Angeles) introduced, and the California Labor Federation is co-sponsoring Assembly Bill 880. It's designed to address what Smith calls a limitation of federal health reform. Under the Affordable Care Act employers aren’t required to cover part-time employees or those working fewer than 30 hours a week.

“We’re hearing that this is a real problem out there,” Smith says. “Workers for Walmart, for restaurant chains, are seeing that their hours are being cut so that these employers can get around paying their fair share through the Affordable Care Act.”

Smith says AB 880 is aimed at preventing low-wage workers who lose hours -- and their health care coverage -- from turning to Medi-Cal.

The fines would vary under the measure, but on average businesses with more than 500 employees would face a $5,500 penalty for each worker who enrolls in Medi-Cal. Smith says the state would collect the fees and use them to offset repeated budget cuts to the Medi-Cal program.

“We don’t support big companies that can afford health care costs for their employees simply pushing those costs onto taxpayers,” he says.

Walmart declined to be interviewed but in a written statement the company said Walmart’s health benefits meet or exceed the requirements of federal health reform.

No one knows for sure how many employees will apply for and ultimately receive Medi-Cal, but researchers have developed a simulation model to come up with some estimates.

Ken Jacobs of the UC Berkeley Center for Labor Research and Education says 250,000 employees from large companies are already on Medi-Cal. Jacobs predicts that number could grow by an additional 100,000 people within the first year after the Affordable Care Act takes full effect.

However, Jacobs points out that most of those workers will not end up on Medi-Cal because a company cuts their hours.

“Cutting to part-time would entail much greater costs than the penalty on employers,” he says. “They’ve got greater hiring costs, more turnover, more supervision costs, more unemployment insurance costs. It’s not worth it.”

While Jacobs believes that some workers' hours will be cut, he says the main reason employees will go on to Medi-Cal is that under Obamacare, more people will be eligible. The program is being expanded to all people making up to 138 percent of poverty, a higher income threshold than is in place today. In California alone more than one million additional people will qualify for the program.

Whether it’s because of reduced hours or new eligibility that workers end up on Medi-Cal, thousands of California businesses oppose paying a penalty if they do.

Law could lead to lay-offs

Some of the loudest protests are coming from those with seasonal and part-time workers. Obamacare doesn’t affect them, but the proposed California law will.

Rick Fowler, CEO of the nonprofit Community College Foundation, says AB 880 would do more harm than good. He employs more than 500 students to work as part-time tutors helping disadvantaged kids get to college. Fowler says those students will suffer the unintended consequences of the legislation.

“I have no choice but to lay off people and increase the rolls of the unemployed and reduce the services that we’re providing to at-risk youth,” Fowler says.

He believes an ongoing and epic battle between labor unions and non-unionized business giants is driving this legislation.

“The sad part is that this nonprofit and perhaps many other good organizations are going to die in the crossfire between those heavyweight players,” he says.

The bill requires a two-thirds majority vote and with Republicans generally opposed it faces a tough hurdle: every Democrat will need to vote yes. Then Governor Brown would have until the end of September to sign or veto the measure.

This story was produced in collaboration with the California HealthCare Foundation Center for Health Reporting, a nonprofit news organization that focuses on California health issues. Based at the USC Annenberg School for Communication and Journalism, the center is funded by the nonpartisan California HealthCare Foundation.