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

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In defending the Medicaid cuts in HR 1, policymakers have argued that Medicaid coverage losses would be offset by gains in employer-sponsored insurance (ESI). 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 for hourly workers 18 and older employed at over 150 of the largest US retail and food service firms, the Shift Project shows how various mechanisms may be associated with exclusion from coverage. The paper finds 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; and because firms can impose a 90-day waiting period and 12-month lookback period before they have to comply with the ACA’s provision, some workers don’t stay long enough to qualify.