Employer-Sponsored Health Insurance for Workers in the Hourly Service Sector

Current policy debate often assumes that large employers offer health insurance to their 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).1 This may seem plausible: the Affordable Care Act (ACA) employer shared responsibility provision requires that employers offer affordable minimum-value coverage or potentially face penalties.2 But exceptions to this provision limit its reach, especially in the service sector, where many workers with low-wage jobs are concentrated. First, while service-sector firms might be assumed to have shared responsibility, such firms and many others employ workers through independent franchises that do not meet the ACA 50-worker cutoff that exempts employers from responsibility. Second, employees working fewer than 30 hours a week are also exempt. In the service sector, part-time status is widespread and often involuntary.3 Third, employers may impose a 90-day waiting period and a 12-month lookback period to assess compliance with the hours threshold.4 In a labor market characterized by high turnover, workers may not stay long enough to qualify.5 We use novel employer-employee linked survey data to show how these mechanisms may be associated with exclusion from coverage.