Assembly Takes Up Health Care ‘Loophole’

The Assembly this week is expected to debate a bill that would penalize large employers who reduce workers’ hours or wages in an attempt to move those employees off company-sponsored health care and into Medi-Cal coverage.

“We want to close that loophole that allows some of the largest and most profitable businesses in California to skirt their responsibility under the Affordable Care Act,” said Assembly member Jimmy Gomez (D-Los Angeles), author of AB 880.

Some large employers, he said, want to lower wages or hours of employees so those workers would earn a low-enough wage to become eligible for Medi-Cal, “dumping them onto the backs of the taxpayers,” Gomez said.

Under the ACA, companies with 50 or more employees are required to provide health care coverage, and must pay a penalty if their employees buy coverage through the state’s health benefit exchange.

“Here’s the loophole,” Gomez said. “Federal penalties do not apply if workers make so little that they qualify for taxpayer-funded Medi-Cal rather than the exchange. This creates a rather powerful and perverse incentive for employers to avoid having workers on the exchange, and avoid paying the federal penalty.”

Gomez called it a de facto subsidy for large employers, “shifting the responsibility and the cost of providing health care coverage from the employer to the taxpayer.”

Bill Dombrowski, president and CEO of the California Retail Association, doesn’t see it that way. He said AB 880 would make implementation of the ACA more difficult, by adding another layer of legal requirements and penalties for businesses.

“We believe implementing the Affordable Care Act should be the focus here, rather than adding more confusion and disincentives at this critical time period,” Dombrowski said. “This bill will not help with implementation. It will only create confusion, massive new costs and disincentives for companies to continue to invest in the state.”

Dombrowski called it an “assault,” not only on larger businesses in the state, but also on the large not-for-profits. “It threatens jobs in almost every industry in the state,” he said. “It is not about just one or two large employers. It has the potential to affect any large organization that has part-time employees. Restaurants, retailers, agriculture, hotels, tourism, construction businesses, just to name a few.”

The issue is a basic one, said Sara Flocks, public policy coordinator at the California Labor Federation. “Central to the idea of the ACA is shared responsibility,” Flocks said. “We are very concerned about some large and profitable employers that are shirking their responsibility under the Affordable Care Act, shifting the cost to taxpayers and also creating a disadvantage for the responsible employers in our state.”

Assembly member Richard Pan (D-Sacramento), chair of the Assembly Committee on Health, is a supporter of the legislation, and said Medi-Cal expansion should not be used as a way to avoid employer-provided coverage.

“Fundamentally, taxpayers felt we should try to be sure people at the lower end of the income spectrum have access to health care,” Pan said. “But I don’t think taxpayers felt the goal was to then subsidize health insurance coverage for people when there’s an opportunity for an employer to fund health care coverage.”

Related Topics

Capitol Desk Insurance Medi-Cal The Health Law