Companies Could Pay Fines, Cut Hours to Avoid Obamacare

Tuesday, 19 Feb 2013 12:56 PM

By Sandy Fitzgerald

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Retailers who employ low-wage workers are considering cutting back their hours or paying fines rather than provide insurance through the rules set up by Obamacare.

David Dillon, CEO of the Kroger supermarket company, told The Financial Times that some companies might decide to pay a fine rather than insurance premiums because it would cost less.

Meanwhile, Dunkin' Brands CEO Nigel Travis said the doughnut chain is lobbying to change the definition under Obamacare of full-time work from 30 hours a week to 40, a move that would save companies money because they would end up insuring fewer workers.

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In addition, some fast-food chains are considering slashing workers' hours so that fewer would qualify for health insurance, while others are keeping their numbers of employees below 50 to avoid the insurance costs.

Dillon said Kroger will keep covering all its full-time workers, but said some parts of the Obamacare law won't work because the penalties may be less costly to companies than insuring their employees.

“If you look through the economics of the penalty the companies pay versus the cost to provide coverage, the penalty’s too low, or the cost of coverage is too high, or the combination is wrong,” he said. “If [policy makers] get those things too far out of balance, everybody will have to reconsider their position on that point, including us. But we’re going to wait and see how that all develops.”

Under Obamacare, companies with more than 50 workers must pay a fine of $2,000 per worker if they don't provide insurance for full-time employees. The Kaiser Family Foundation, a nonpartisan policy group, says insurance costs companies an average of $4,664 per year for single coverage and $11,429 for families.

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