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Letter to HELP Committee on ACA definition of "full-time"

January 21, 2015

Dear Senator: 

On behalf of the three million members of the National Education Association and the students they serve, we respectfully submit these comments in conjunction with tomorrow’s hearing, “Examining Job-Based Health Insurance and Defining Full-Time Work.”

NEA opposes the Forty Hours Is Full Time Act of 2015 (S. 30) because we believe it would lead to a greater disincentive for employers to provide health-care coverage. By doing so, the bill would adversely affect employer-sponsored health insurance and harm families, children, and educators in need of health-care coverage.

Under the Affordable Care Act (ACA), “shared responsibility for employers”—sometimes called the employer penalty—includes paying part of the cost of coverage for full-time employees, now defined as those working 30 hours per week per month on average. Raising that to 40 hours per week, as S. 30 does, would encourage a shift towards part-time employment. To avoid possible shared responsibility penalties, employers could cut employees’ hours and then eliminate their coverage entirely. That, in turn, could lead to a large increase in federal spending for premium tax credits to enable low- and moderate-income people to buy coverage in the health insurance marketplace (“exchanges”). Moreover, determining who falls above—and below—the 40-hour mark would impose a complex administrative burden, especially for schools because they generally do not track the exact number of hours worked by salaried employees.

One of the biggest ACA implementation challenges in the education sector has been making sure that employers and other health plan sponsors fully understand the law’s provisions with regard to shared responsibility for employers. For years, we have engaged with the Treasury Department and Internal Revenue Service to ensure that the regulations on shared responsibility consistently work well in the education sector. While we believe regulators have taken important steps in that direction, raising the full-time threshold to 40 hours would create new regulatory challenges in the education sector. It would also do nothing to stop misuse of the ACA’s employer penalty provisions to justify cutting back employees’ hours and health-care coverage. Such a change would simply alter the context for these common errors:

  • Mistakenly believing that the only way to avoid employers’ penalties is to cut employees’ hours to fewer than 30 a week or six a day. School calendars include so many unpaid days during the school year—spring break, winter break, federal holidays, and other such times—that an hourly employee can normally work more than six hours a day without ever being considered a full-time employee.
  • Misunderstanding how and when to use the “look-back measurement method,” an optional approach to counting hours. The proposed regulations recognize four different ways that employers can calculate whether an employee is full-time or not.
  • Overestimating the potential cost of complying with the law’s provisions on shared employer responsibility. Even though the regulations allow employers to minimize or even avoid penalties in many ways, some fail to factor all options into their analyses. Instead, they exaggerate and often incorrectly state the potential for penalties.
  • Failing to incorporate into decision-making the possibility of a penalty on large employers rather than an “employer mandate.” No federal law requires employers to offer coverage to employees, including the Affordable Care Act. Many large employers will face no penalties or smaller penalties than initially anticipated.

Employers who take the time to understand the law and regulations as they currently stand can develop common sense, constructive, and consensual approaches to properly implementing the Affordable Care Act. We urge you to retain the 30-hour definition of full-time employee and vote NO on the Forty Hours Is Full Time Act of 2015.

Sincerely,

Mary Kusler 
Director of Government Relations