MIDDLETOWN — The township shaved back hours for some part-time workers to avoid providing insurance required under the federal health care reform law, the Asbury Park Press has learned.
The change impacts about 25 part-time employees. But that could translate to a $775,000 annual increase in the township’s health insurance costs, based on the current benefits in place now, which are about $31,000 per employee.
Starting May 1, Middletown adjusted hours for part-time employees to make sure they work, on average, less than 30 hours per week, the threshold that the Affordable Care Act considers a full-time employee.
The law, often called Obamacare, requires that employers, including schools and municipalities, offer health care coverage for these workers or face an annual penalty of anywhere from $2,000 to up to $3,000 per employee.
The so-called “employer mandate” has been delayed until 2015, but Township Administrator Anthony Mercantante said it’s not clear how far back the federal government will look at employee hours. So to stay on the safe side, the township is making the move to reduce hours now.
“Employers like us are still trying to figure out the ramifications,” he said. “I’d be shocked if other towns aren’t doing the same thing.”
And he’s right.
Media reports from across the country indicate towns, counties, public schools and universities — including Youngstown State University in Ohio, Brevard County in Florida and the Fort Wayne Community School District in Indiana — are starting to roll back part-time hours to avoid the cost of providing health insurance coverage. Dearborn, Mich., for example, is moving 200 part-time employees to 28 hours a week.
Similar changes are happening in the private sector as well. Employers such as Papa John’s and some Subway franchise owners are warning that they may have to reduce employee hours to keep them under the 30-hour threshold.
Most of Middletown’s 148 part-time employees, more than half of whom are crossing guards, already were working fewer than 30 hours, Mercantante said.
The health care reform does not impact smaller towns like it does larger ones. The requirement to offer health insurance does not apply to employers of fewer than 50 workers like Plumsted Township in Ocean County, township business administrator Ron Dancer said.
“Unfortunately, I do know of larger public employers that have notified part-time employees that their hours will be reduced to 29 hours per week,” Dancer, also a state assemblyman, wrote in an email.
Officials in Holmdel sent its roster of part-time employees to its insurance broker so it could get a handle on how much it would cost to pay for health insurance, Township Administrator Donna Vieiro said.
She said she doesn’t think Holmdel will have to change part-time hours because the township doesn’t have many employees for whom they would have to offer health insurance.
Holmdel, however, is still keeping tabs on the issue, as are other New Jersey governments.
“It is going to impact a lot of towns,” she said.
The health care reform puts towns in a tough situation.
Many towns use part-time workers so they won’t have to provide health benefits to keep municipal costs — and taxes — down, Vieiro said. But a town’s cost of a part-time worker making $20,000 per year could nearly double if it has to offer a benefits package.
Vieiro is on the executive board of the New Jersey Municipal Management Association. That organization is offering information sessions at the League of Municipalities meeting in November to help local governments, she said.
The League of Municipalities did not have numbers on how many towns are cutting part-time hours, said Ed Purcell, a staff attorney with the organization.
“It’s the prerogative of municipalities to make these decisions, especially considering the fiscal situation a lot of municipalities find themselves in under the hard 2 percent cap,” he said.
Under New Jersey law, municipalities must seek taxpayers’ approval if they want to increase taxes by more than 2 percent.
The New Jersey Department of Community Affairs does not have experts on the health care reform law and has been telling towns seeking advice to speak with their health care experts and attorneys to make sure they understand how it impacts them and to plan accordingly, agency spokeswoman Tammori C. Petty said.
Middletown has an all-Republican governing body, but officials say the move to reduce hours was an administrative one.
Middletown Mayor Gerald Scharfenberger brought up the issue at Monday night’s Township Committee meeting in reaction to comments he said he’s heard from public employees upset that their hours have been cut.
“It’s not just the ‘evil rich people’ the (federal) government is going after,” said Scharfenberger, a Republican. “The people who can afford it the least are getting hurt the worst.”
Contributing: Staff writer Amanda Oglesby
Susanne Cervenka: 732-643-4229; scervenka@ njpressmedia.com