Full time is defined here as 2,000 hours per year.
Self-insured plans, large employer-sponsored group plans, and employer-sponsored plans that have been grandfathered will not be required to provide minimum essential health benefits.
The portion of the health care law related to the employer mandate explicitly states that firms with more than 50 employees are required to offer “full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer sponsored plan.” The Department of the Treasury, however, has issued a rule linking both the affordability of employer-sponsored insurance and compliance with the individual mandate to single coverage only. Since the employer is not penalized unless an employee enrolls in the exchanges, it is likely that affected employers will either drop family coverage or be indifferent to the affordability of the workers’ family coverage.
Heritage Foundation calculations using data from the 2013 Kaiser employer health benefits survey, extrapolated to 2015 using an assumed 5 percent growth rate for single plans. Note that the law states that the employee share of health care premiums may not exceed 9.5 percent of family income. This figure is based on the assumption that employers can charge employees premiums of 9.5 percent of their individual income. This will be the case for those who are either single or the sole income earner in a family. For a two-income family, employers can charge higher premiums to employees with employed family members. However, employers cannot discriminate against workers on the basis of the earnings of other family members. Consequently, employers will be forced to make decisions based on the assumption that the employee share will not exceed 9.5 percent of individual income. These figures represent the minimum costs that employers must assume that they will incur when they hire a worker.
The average combined state and federal corporate tax rate in the United States is 39 percent. Payroll costs are deductible from these taxes. Consequently, increasing payroll costs by $3,279 reduces tax obligations by $1,279 (0.39 x $3,279). The increase in payroll costs reduces after-tax earnings by $2,000 ($3,279 – $1,279).
Figures were calculated for each state by taking the minimum wage in that state and adding to it the 7.65 percent share of employer payroll taxes and the UI taxes paid by a newly formed business hiring a minimum-wage worker. In states for which UI tax rates for new firms are calculated separately by industry, the average employer rate for the entire state was used. In states with scheduled future minimum wage increases, the legislated 2015 value was used. Minimum wages for states that index their minimum wages to the cost of living were increased by an assumed 2.4 percent annually to calculate their future rates. To calculate the variation in insurance premiums between states, we comprised an index of individual and family employer-sponsored premiums for workers in the bottom earnings quartile from the 2013 Kaiser employer health benefits survey. From the total premiums, we subtracted 9.5 percent of the income of an employee working full time at the minimum wage to yield the employer share of premiums. That figure was divided by 2,000 hours to yield the hourly cost. The national average was calculated by taking the weighted average of the state-specific costs with the states’ total private employment in January 2013.
See details of the Alpha at the Momentum Machines website, www.momentummachines.com (accessed November 20, 2013).
Lisa Scherzer, “Fast-Food Chains Cut Worker Hours, Blame Obamacare,” Yahoo! Finance, The Exchange, January 9, 2013, http://finance.yahoo.com/blogs/the-exchange/fast-food-chains-cut-worker-hours-blame-obamacare-224911846.html (accessed November 14, 2013); Investor’s Business Daily, “Obamacare Employer Mandate: A List of Cuts to Work Hours, Jobs,” updated November 5, 2012, http://news.investors.com/politics-obamacare/110513-669013-obamacare-employer-mandate-a-list-of-cuts-to-work-hours-jobs.htm (accessed November 20, 2013).
James Sherk, “Minimum Wage Workers’ Incomes Rise When the Minimum Wage Does Not,” Heritage Foundation WebMemo No. 1181, July 28, 2006, http://www.heritage.org/research/reports/2006/07/minimum-wage-workers-incomes-rise-when-the-minimum-wage-does-not.
William E. Even and David A. Macpherson, “Wage Growth Among Minimum Wage Workers,” Employment Policies Institute, June 2004, Table 4, http://www.epionline.org/studies/macpherson_06-2004.pdf (accessed November 20, 2013).