Target to drop health insurance for part-timers

  • Article by: JACKIE CROSBY , Star Tribune
  • Updated: January 22, 2014 - 9:52 AM
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Customers purchase merchandise at a Target Corp. store in Chicago.

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Target Corp. said Tuesday that it will stop offering health insurance to its part-time employees because new online health exchanges offer workers an opportunity to buy coverage.

The Minneapolis-based retailer will give each worker $500 to help buy health insurance, and has arranged for one-on-one consultations with benefits manager Towers Watson to help with the transition.

The retailer announced the decision through its online site, “A Bullseye View: Behind the Scenes at Target,” in a Q&A with Jodee Kozlak, Target’s executive vice president of human resources.

In the article, Kozlak acknowledged the disruption to workers. But she said the exchanges might offer options that some workers will prefer, and noted that those who qualify for subsidies and tax credits could find insurance that is less expensive than their current plan offered by Target.

“Our decision to discontinue this benefit comes after careful consideration of the impact to our stores’ part-time team members and to Target, the new options available for our part-time team, and the historically low number of team members who elected to enroll in the part-time plan,” Kozlak said.

Kozlak was not available for an interview, according to a Target spokeswoman.

Low participation rate

Target, the nation’s second-largest discount retail chain, said less than 10 percent of its workforce of about 361,000 participates in the health plan for part-time workers.

The retailer’s decision heralds a broader shift in the insurance marketplace, as companies of all sizes move away from providing traditional health coverage options for their workers. Changes are most pronounced in the retail and restaurant industries, which have large numbers of part-time and low-wage workers, as well as high turnover.

A number of companies, including Walgreens, Sears Holdings, Petco and Darden Restaurants, this year moved their entire workforce to private exchanges.

Unlike public exchanges, which are operated by states and the federal government as part of the Affordable Care Act, private exchanges are designed for individual companies and run by insurers and benefits consultants, including Towers Watson, Aon Hewitt and Mercer.

Employers using private exchanges often contribute a set amount toward insurance and let employees choose a plan that best fits their pocketbooks and medical needs.

But Twin Cities union organizer Bernie Hesse sees the move to shift workers to public exchanges as part of “a disturbing trend” among retailers. He fears that low-wage workers, many of whom qualify for public health programs, will have their hours limited because corporations can get off the hook financially by sending people to the exchanges.

“All of a sudden where you used to work 31 hours a week, it’ll be cut to 28 hours or less — and that’s a huge hit,” said Hesse, of the United Food and Commercial Workers Local 1189 in St. Paul. “You’ll see a department that might have one or two real full-timers and the rest will be these perpetual part-time people who will never have a chance for full-time hours because Target is looking at everyone as a cost.”

A new trend

University of Minnesota finance professor Steve Parente predicted that “Target is just the first of many.”

“It makes sense for retail and others in the service industry because they have the biggest burdens to bear in terms of smaller margins,” he said. “What Target and others are looking at is that the exchanges — even with hiccups — are online and they are operating better than they were previously.”

Kozlak said Target would not limit hours as a result of the change, saying employees at any time “can talk to their manager about their interest and availability to work more hours.”

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