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City Governments Struggle with Staffing as a Result of Health Insurance Changes

Published by USC Bedrosian Center on

by Jeremy Loudenback

Insurance and pension costs for city employees are a near-constant worry for city governments from New York to Smalltown, U.S.A. As healthcare costs skyrocket, budgeting for employees’ insurance is a tricky proposition. Now, as the Affordable Care Act (ACA) begins the implementation process, city managers are having to contend with a new set of dynamics.

Employee hours under scrutinySpending on healthcare premiums for the city of Rocklin, CA, topped about $870,000 this year, a 180% rise from four years ago, part of a continuing national trend of explosive growth in healthcare costs. But with the ACA on the horizon, Rocklin and cities like it are taking action.

Instead of laying off workers, Kim Sarkovich, Rocklin’s chief financial officer, said the city will instead focus on ensuring they don’t work more than 30 hours per week so the city doesn’t have to worry about unforeseen healthcare costs.

Rocklin isn’t alone in reducing the hours of its employees. As the clock ticks toward a January 1, 2015, implementation deadline for ACA, employee hours are a subject of scrutiny for state and local government administrators across the country. Since the ACA mandates healthcare coverage for employees who work at least 30 hours a week, municipalities are choosing to reduce the hours of their part-time employees rather than risk thousands of dollars in additional costs. Some cuts are happening relatively ahead of schedule because of negotiations with unions for future contracts or because some city officials are afraid that some part-time employees who are above the 30-hour threshold this year may be included on healthcare plans in 2015.

From Middletown Township, NJ, to Bee County, TX, employee hours are being pared back, with uneasy implications for effective governance once the ACA goes into effect. At the heart of the issue is uncertainty about the ways in which the ACA will be implemented and how healthcare costs will be affected. Don’t be surprised to see more cash-strapped local governments make similar decisions rather than wait to find out.

Bedrosian Center