Employer-sponsored insurance is often out of reach for service-sector workers

What’s the issue with employee-sponsored insurance for hourly workers?

In defending Medicaid cuts in HR 1, policymakers have argued that Medicaid coverage losses would be offset by gains in employer-sponsored insurance (ESI), but new research from the Shift Project sheds light on how this may not be the case. One may think that the Affordable Care Act’s employer shared responsibility provision requires that employers offer ESI or potentially face penalties. However, various exceptions to the provision limit its reach, especially in the service sector, where many workers with low-wage jobs are concentrated.  

Using novel employer-employee linked survey data from the Shift Project, researchers Gaby Aboulafia MPP 2023, PhD Candidate in Health Policy at Harvard University, and Daniel Schneider, the Malcolm Wiener Professor of Social Policy and co-director of the Shift Project, show how various mechanisms may be associated with service-sector workers’ exclusion from ESI. 

 

What does the research say? 

The researchers found that workers at service-sector firms are often excluded from protections under the ACA’s employer provision for a variety of reasons. These included that: 

• Service-sector workers are often employed at independent franchises that are exempt from the employer provision, as they employ less than 50 employees.  

• Many service-sector workers involuntarily work only 30 hours a week, making them exempt from the provision’s protections. 

• Because firms can impose a 90-day waiting period and 12-month look-back period before they have to comply with the ACA’s provision, some  workers don’t stay long enough to qualify. 

“The structure of the low-wage labor market coupled with the limitations of the employer provision leaves many workers in the service sector without access to ESI,” the researchers write, “Moreover, some firms offer ESI that meets the ACA definition of affordable coverage but remains effectively unaffordable to workers. These realities have important implications for policies that view ESI as a substitute for Medicaid for workers in the service sector.”