Affordable Care Act may affect jobs once fully implemented

Just one year away from its full implementation in 2014, the Affordable Care Act continues to raise concerns as many consider the effects it may have on national full-time employment.

One part of the ACA — passed in 2010 — says that companies with more than 50 employees must provide affordable health care insurance to employees so they do not get fined several thousand dollars per worker.

However, this penalty rule only applies to full-time workers — employers won’t be fined for not providing health insurance to part-time employees who work 30 hours or less per week.

With these conditions, some have been afraid that employers will avoid hiring if they are near the 50-employee quota, or that employers will begin to hire more part-time instead of full-time workers so they aren’t penalized. Economists and health care management experts do not all agree on the relative severity of the situation.

Scott Harrington, a professor of health care management at the Wharton School, said that there is reason to believe the ACA will have negative effects on employment in both of the above-mentioned dimensions to some extent.

“Employers in the 30- to 40-employee range will think very carefully about hitting that magic number of 50,” Harrington said.

“The primary effects,” he added, “would be on sectors and employers that are relatively low-wage and low-skill.”

Professor of health care management Mark Pauly agreed. Both Harrington and Pauly also agreed that the debate over the effects of the ACA is also linked to the issue of the national minimum wage.

“If you have an employer that’s primarily employing low-skill and low-wage workers and not providing health insurance,” Harrington said, “[and] if they have to start providing health insurance or pay a penalty, it increases their costs of hiring. If there isn’t any offset in wage, it makes it much less attractive to hire people.”

One view is that employers could reduce wages so as to cover the costs of the required purchase of health insurance. This tactic only works until employers hit the minimum wage, below which they can no longer take money out of wages and put it towards the cost of the insurance.

Another consideration is the labor supply itself. According to Harrington and Pauly, people’s willingness to work is based on and very sensitive to wages and benefits. If wages are reduced as employers purchase their employees’ health insurance, workers might come to see a job as less attractive overall.

“Workers might pull out of the labor market if less cash and more insurance isn’t worth it to them,” Pauly said. “It’s the workers’ valuation of health insurance that’s really key here.”

Another way to look at the situation, Pauly added, is that “when health reform kicks in, there will be a lot more people with health insurance than before — around 25 million more people will have insurance.” The more people that have health insurance, the more people will use health care services — meaning that the ACA might actually have a positive effect in the creation of more jobs in the health care industry.

While Harrington believes the ACA will definitely have some effect on employment and Pauly thinks it probably will, professor of economics Hanming Fang believes that the ACA will have little overall effect on American employment.

“On the one hand, there might be some incentives for firms whose intended size was 50 prior to the ACA to cutback some hiring so as to stay below the threshold of 50,” Fang said in an email. “On the other hand, it can increase the ability of small firms to hire more workers because now workers in these small firms can buy affordable health insurance from the exchanges.”

He added that as the workforce becomes healthier and more productive because of the additional coverage, hiring will increase. However, Fang concluded that “the several margins of adjustment mentioned … more or less cancel out.”

While experts have not yet reached a consensus on the effects the ACA will have on U.S. employment, Pauly claimed that the policy is not as bad as critics make it out to be.

“Of all the health care policies that might end in total disaster,” he said, “this is not one of them.”

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