On Target

The big news in the healthcare world was that Target Corporation would stop offering health insurance to part time workers effective 4/1/14.  Over the long run, this is good policy news. 

Here is the Minnesota Star Tribune:

The Minneapolis-based retailer will give each worker $500 to help buy health insurance, and has arranged for one-on-one consultations with benefits manager Towers Watson to help with the transition….In the article, Kozlak acknowledged the disruption to workers. But she said the exchanges might offer options that some workers will prefer, and noted that those who qualify for subsidies and tax credits could find insurance that is less expensive than their current plan offered by Target….

Target, the nation’s second-largest discount retail chain, said less than 10 percent of its workforce of about 361,000 participates in the health plan for part-time workers….

The change goes into effect April 1, the company’s normal open-enrollment period. It will affect those who average 20 to 31 hours a week.

Health policy wonks across the political spectrum have at least a shared common stated goal of decoupling employment from health insurance over the long run.  Companies don’t want to be health insurance purchasers and managers, people don’t want to be tied to a job because that is the only place they can get health insurance and the federal government does not want health insurance tied to employment for tax reasons.  It is a massive economic and societal distortion that should be facilitated away. 

Target’s plan to shift 35,000 people to the Exchanges is the first of many companies deciding that it does not want to be the health insurance point of contact when an adequate or better replacement is available.  This was part of the plan of PPACA as the Exchanges in 2014 were overwhelmingly built for individuals and very small companies, by 2017, they are able to be open to any employer group. 

And honestly speaking, most of the people who are no longer eligible to renew their plan at Target because Target is not offering it will be better off.  Assuming an average wage of $10 an hour and a full work year, the income ranges from $10,500 to $16,750.  In expansion states, that is the sweet spot of the Medicaid expansion so people will be getting very low co-pay insurance and a $500 bonus from Target.  In non-Expansion states, this a little messier.  If the person is single, the vast majority of people are subsidy eligible, and can get cost-sharing assistance Silver plans with a very significant subsidy.  If the person is trying to insure a family, they might be stuck due to fucking Chief Justice Roberts et al as their income (if this is a sole source of income for the family) is too high for legacy Medicaid but too low for subsidies.  I am hoping Target is thinking this through to make sure these people are no worse off. 

Over the long run, we should expect to see more employers put their employees on the Exchange either directly by no longer offering coverage and paying the employer mandate fee OR by giving their employees a subsidy to buy insurance on the SHOP exchanges in the next couple of years.  And from a policy perspective, this is a good to very good thing.






36 replies
  1. 1
    Cervantes says:

    Companies don’t want to be health insurance purchasers and managers, people don’t want to be tied to a job because that is the only place they can get health insurance and the federal government does not want health insurance tied to employment for tax reasons. It is a massive economic and societal distortion that should be facilitated away.

    Nice summary. Wish these things were more fully understood.

    Also, is that $500 a one-time-only thing? Does it only cover current part-time employees or new hires also? And how about current part-time employees who have so far not elected to participate in Target’s health plan for part-time workers? Will they be helped?

  2. 2
    maximiliano furtive, formerly known as dr. bloor says:

    This won’t be (immediately) popular among many onlookers, but I agree that anything getting employers out of the business of marketing health insurance is a good thing in the long term.

    I never could figure out why big corporations weren’t pushing for expanded medicare/public options when the ACA was being formulated–seemed like an obvious win for them.

  3. 3
    raven says:

    I work for a large educational institution that has a number of health insurance options. I keep hearing that they want to move us off their policies and onto the exchange. If we are near retirement what will the impact be?

  4. 4
    WereBear says:

    anything getting employers out of the business of marketing health insurance is a good thing

    One of the very bad things about it is: you get sick, you get fired: poof!

    No income and no health insurance! You’re very welcome.

  5. 5
    jon says:

    @WereBear: That’s always a risk, but the FMLA and other laws offer some protections.

  6. 6
    jon says:

    @WereBear: That’s always a risk, but the FMLA and other laws offer some protections.

  7. 7
    OzarkHillbilly says:

    @Cervantes:

    Nice summary. Wish these things were more fully understood.

    Gee, now who could be responsible for that? (end of sarcasm)

  8. 8
    Patrick says:

    @maximiliano furtive, formerly known as dr. bloor:

    I never could figure out why big corporations weren’t pushing for expanded medicare/public options when the ACA was being formulated–seemed like an obvious win for them.

    Exactly. By not having to pay for their employee’s health care, wouldn’t that make American companies more competitive against foreign companies? If so, shouldn’t any America loving person be in favor of this?

  9. 9
    Big R says:

    @jon: As a plaintiff’s employment lawyer, I can only agree to the extent that “some” means “nearly none.” Even though FMLA is better than no sick leave, the jurisdictional requirements mean most workers have no entitlement to FMLA leave, and the way the courts have read the statute has eliminated most of the remaining protections. As with most modern employment law, successfully protecting your rights, either before or after you get fired, requires passing a camel through the eye of a needle.

  10. 10
    Boudica says:

    @Patrick: I’m assuming you mean person as in corporations are people, my friend. I’m all for nationalized healthcare, but do the corps. pay into it (the money they used to put towards our premiums) or do they get to keep the $ and I now pay the premium to the exchange which leaves them richer and me poorer?

  11. 11
    ericblair says:

    @Patrick:

    Exactly. By not having to pay for their employee’s health care, wouldn’t that make American companies more competitive against foreign companies? If so, shouldn’t any America loving person be in favor of this?

    My guess is: joblock works for them, and it gives them a competitive advantage over smaller companies since the big corporations can get a better deal on premiums.

  12. 12
    maximiliano furtive, formerly known as dr. bloor says:

    @ericblair: Possibly, although given the existence of public exchanges now might make the math more interesting. MegaCorp Inc. offers Joe Sixpack $20/hr plus health insurance, while StartUp offers, say $25/hr with no health insurance, but they’ll cover the annual deductible on an employee’s self-pay exchange insurance up to 3-5 thousand $ per year. The devil is in the details, of course, but it might be that MegaCorp is going to have to offer a pretty nice (and expensive) plan (minimum deductible, low employee contribution and copays) to make it a plainly better idea for Joe to stay.

  13. 13
    Chris says:

    @maximiliano furtive, formerly known as dr. bloor:
    @Patrick:

    Only if you assume that the competitiveness of their company is more important to them than the control over their employees’ lives they get from being their only source of health insurance.

    @ericblair:

    There’s that, too.

    IIRC, the original conservative revolution (the one that nominated Goldwater in 1964) had a lot of backing in small and medium sized businesses also because of employee benefits issues. Big corporations had made their peace with the labor movement (after all, they could afford to pay high pensions, health insurance, etc), but smaller ones were having trouble meeting union demands. The logical thing would’ve been to rally for an expanded welfare state that would take things like health insurance off their backs and spread the burden around… but, nope. They chose to just be mad at the unions and rally around Goldwater instead.

  14. 14
    Patrick says:

    @Boudica:

    do they get to keep the $ and I now pay the premium to the exchange which leaves them richer and me poorer?

    Well, in theory, they get to keep the dollars so that they are more competitive against foreign corporations. That should happen since they no longer have to spend dollars on health care. BTW – companies in foreign countries don’t have to spend money on health care.

    Why would you be poorer if you have to spend money on premiums on the exchange? And isn’t it better to spend money on insurance on the exchange than be slave under a company just because your health insurance is tied to that company…

  15. 15
    Patrick says:

    @Chris:

    Only if you assume that the competitiveness of their company is more important to them than the control over their employees’ lives they get from being their only source of health insurance.

    Do you really think that the shareholders of a company care more about having control of their employee’s lives vs making more money?

  16. 16
    malraux says:

    @maximiliano furtive, formerly known as dr. bloor: While it might be a win for the corporation, it is surely a loss for the individuals in management. They both lose control of their employees a bit and will see higher taxes.

  17. 17
    Howlin Wolfe says:

    Minnesota Star Tribune, Minneapolis Star Tribune, what’s the diff? it’s just a giant drive-in, fly-in freezer at this point.

  18. 18
    maximiliano furtive, formerly known as dr. bloor says:

    @malraux: They were going to lose control of their employees either way. The question is whether the increase in taxes offset the money they lay out in employee health benefits. Hard to believe that’s the case.

  19. 19
    Cervantes says:

    @Patrick:

    Do you really think that the shareholders of a company care more about having control of their employee’s lives vs making more money?

    You sure that’s an either-or proposition?

  20. 20
    japa21 says:

    Small quibble. IIRC, Trader Joe’s was the first to do this. I remember a big uproar from the Right how the ACA was causing people to lose their insurance and used TJ as an example, although it turned out to be more like what Target is doing.

  21. 21
    Chris says:

    @maximiliano furtive, formerly known as dr. bloor:

    Then what is the explanation? As you say, it doesn’t make economic sense. So either they don’t agree with you and think taxes will hurt them more… or they really are that petty.

    Considering the incessant whining from the rich about how the little people don’t respect them enough, I would venture a guess that they really are that petty.

  22. 22
    balconesfault says:

    From what I’ve read, the average tax subsidy for an employer-provided health insurance policy comes to almost $4,000/year.

    And how many of those whining about the ACA subsidies to low-income wage-earners are benefitting from those tax subsidies?

  23. 23
    Jake Nelson says:

    I’m one of the affected, and I think it’s great news. I’m in Minnesota, best rates in the country- I can get a $1000/yr max out-of-pocket policy (that includes almost every provider in the state in-network) for $189/mo before subsidy on the exchange. I was paying about $100/mo for the part-time plan they were offering before, which is a silver-equivalent high-deductible+HSA plan… I was considering it anyway, but now that I can qualify for a subsidy, hoo boy.

  24. 24
    NonyNony says:

    @Chris:

    Then what is the explanation? As you say, it doesn’t make economic sense. So either they don’t agree with you and think taxes will hurt them more… or they really are that petty.

    Remember that, despite what the rhetoric might say, “corporations” are not people. They are groups of people. Who have their own biases and beliefs. It may very well be that the high-level folks at a corporation can look at the numbers and say “in the long term, this would be marginally better for the company’s profits and competitiveness, but I like my own health insurance and wouldn’t want to lose it” or “but I hate Democrats and this will help Democrats, so no” or “bu I don’t actually believe that’s true because market forces say not” or “but hell no because socialism, fascism, communism, fluoride in the water, argle-bargle”, or whatever.

    If they’re forced to do it, they’ll gain the benefits while still being able to bitch about it, which gives them the best of both worlds in the end. There really is a problem when viewing even corporations as rational actors devoted only to their own profit maximization – they are not. They are run by people, who have agendas and biases, and those people belong to a social network that reinforces those agendas and biases. And so even if you could prove to them that it would be more profitable for them to do X, it won’t matter if their social network is constantly pressuring them to reject X.

    TL;DR – Peer pressure. It ain’t just for teenagers.

  25. 25
    Roger Moore says:

    @maximiliano furtive, formerly known as dr. bloor:

    I never could figure out why big corporations weren’t pushing for expanded medicare/public options when the ACA was being formulated–seemed like an obvious win for them.

    It’s actually a much bigger win for small and medium sized businesses. Big businesses can manage that stuff and have big HR departments set up to do just that, while smaller companies have a harder time with it. So big businesses might see the hassle of dealing with medical insurance as being outweighed by the advantage it gives them as an employer over smaller companies.

  26. 26
    Mnemosyne says:

    If I remember PPACA correctly, I think that Target will also have to pay a penalty to the government for doing this to help offset the cost of the employees going on the exchanges, so it’s not like they’re going to get off scott-free. They probably calculated that paying that penalty + giving each employee $500 towards insurance was still cheaper in the long run.

  27. 27
    malraux says:

    @maximiliano furtive, formerly known as dr. bloor: You’re looking at the wrong numbers. Sure, the company will save money, but the ceo’s stock options are now going to be subject to the medicare tax. So the company ends up with somewhat more profit, but the ceo is stuck with a higher tax bill. The ceo is putting his personal interests ahead of the company, but because the BoD and majority stock holders feel the same way, he can get away with it.

  28. 28
    negative 1 says:

    @ericblair: There is no way that paying for health insurance makes any kind of fiscal sense for a corporation anymore, and I think that they will ultimately be very happy when it stops.
    In my opinion the ownership class hated the ACA because Obama proposed it, no other reason at all.
    Yes it will make American corporations far more competitive on a global scale, research some of the auto industry bailout discussion circa 2009 and you’ll find a ton of mention of that fact.
    If you’re being generous, there are two reasons corporations liked paying for healthcare. One was that it was a subsidized form of compensation, i.e. by not being taxable it was like a 25% government subsidy for a form of compensation. The second is that to the extent that people ‘pick’ an employer, employers have an agency problem. No one wants to be the first to do away with healthcare, because all other things equal you’ll go with the employer who offers it over the one that doesn’t. I personally (and apparently Target agrees with me) don’t think this is that big of an issue. I guess we’ll see.

  29. 29
    Roger Moore says:

    @Patrick:

    Do you really think that the shareholders of a company care more about having control of their employee’s lives vs making more money?

    The shareholders, possibly not. But in case you haven’t been paying attention, shareholders these days have little say in how companies are run. Management has taken control to the point they feel free to ignore the shareholders, and they certainly do seem to care more about running their employees’ lives than maximizing profits.

  30. 30
    chopper says:

    Companies don’t want to be health insurance purchasers and managers

    of course not. that’s a lot of paperwork and that costs money.

    of course, the side benefit is you get to treat your employees like shit while dangling a major benefit over their head saying ‘what are you gonna do, quit? we know about your kid’s diabetes, you’re uninsurable’

  31. 31
    negative 1 says:

    @chopper: It’s doubtful that’s the case as much anymore. Even if you work for Dr. Evil it’s difficult for them to get access to such knowledge due to HIPAA and most people’s spouses work, basically giving you a fallback in case you lose your job, and now there’s the exchange. As I said above, a tax-free way to give compensation is essentially a 25% or so subsidy, so corporations liked it. Then it became an expectation, so there’s a consequence to being the early adopter and giving it up as a benefit. I think they’d all get out now if they could.

  32. 32
    Chris says:

    @NonyNony:

    So, “they really are that petty,” just not the way I imagined.

  33. 33
    boatboy_srq says:

    @Patrick: There’s a lot of propaganda value to prospective hires for employers to provide healthcare. It’s one of the non-monetary compensation items that have replaced living-wage/meaningful-salary discussions.

    The difficulty with the proposal is this: healthcare-as-employment-benefit was one of the perks industry offered in lieu of wage increases or (for new hires) living/just wages. For the last 20 years or so, cutting these “benefits” has been part of the Corporate Sphere’s way of dealing with their finances: easier/simpler to shift the burden to employees than to shareholders. Yet the basic benefit was retained, largely because a health insurance scheme was perceived as something marketable to new employees and the just due of the existing staff. Transferring health insurance obligations completely to the employees should, in the original arithmetic, translate to higher salaries, since the benefit was offered in place of better pay. Yet nowhere do I see this aspect discussed. What is the likelihood that businesses will end health insurance as a benefit and replace it with nothing?

  34. 34
    Fake Irishman says:

    @Mnemosyne:

    Actually it’s OK to do this — part-time employees (under 30 hours a week I believe) don’t need to be offered health insurance. And that’s only if the employer mandate goes into effect (it may not) in 2015.

  35. 35
    Raflw says:

    I agree with the long-term decoupling idea. I have concerns about taxpayers subsidising Target part-timers via Medicaid, but only from the employer side. In other words I do not begrudge the workers getting cheap health insurance at all. do worry that Target may want to expand the ranks of part-times to offload the insurance cost and let taxpayers deal with it.

  36. 36
    Buffalo Rude says:

    When I first read about the Target story, the article I saw “blamed” the move on the PPACA and that brought forth a whole shitload of anger. Then, later in the day, I checked my snail mail at my PO Box and opened an envelope that contained two insurance cards with my name on them and almost broke out in tears at the Post Office. It’s been almost six years since I lost my corporate gig and my health insurance, and now I have a decent plan for decent money that isn’t coupled with whatever job I may or may not have.

    THANKS OBAMA! (Rather, Thank you NANCY SMASH!)

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