State bill proposes cracking down on 'Walmart loophole'

May 9, 2013 10:00:00 PM PDT
There's a move in Sacramento to penalize companies that cut back workers' hours to avoid having to offer them health insurance next year, when federal health reform kicks in. ABC7 News takes a look at the benefits and potential risks of closing the so-called "Walmart loophole."

"My hours are being cut," said full-time retail associate Barbara Andridge.

With her schedule reduced, Andridge couldn't afford to buy her own health coverage any more, so she enrolled her son in a government program.

"He's on Medi-Cal now and I'm going to have to enroll and get it myself too," said Andridge.

Critics say that's a growing trend. Beginning next year, the Federal Affordable Care Act requires employers to provide coverage to anyone working 30 hours or more a week. So to avoid the mandate, hours are reduced. The smaller checks are forcing many low-wage workers to go on taxpayer-paid state programs like Medi-Cal.

Assm. Jimmy Gomez, D-Los Angeles, says he doesn't think that is right. He has a measure to financially penalize anyone trying to take advantage of what's been dubbed the "Walmart loophole," though other companies are accused of side-stepping the healthcare mandate. The money will go to Medi-Cal. If the problem isn't fixed, Gomez estimates taxpayers will have to pick up the tab of an additional 400,000 Californians.

"The non-federal, state portion of Medi-Cal will continue to grow until it squeezes out all of the programs: education, public safety. You name it, the program will be squeezed out," said Gomez.

Companies deny hours are being reduced to circumvent the law. Opponents, including Walmart, are teaming to fight the proposed penalty. They say there's already a federal penalty in place and that the state's fine could be six times that, or up to $15,000 per employee.

They insist any added costs will hurt the economy.

"It's like a gun to an employer's head," said Bill Dombrowski from the California Retailers Association. "It promises to increase our unemployment rate, guarantees it. And that's what we're telling people."

Andridge just wants her full-time hours back and health coverage.

"It's something I should be able to provide for my family," said Andridge.

The Gomez bill has until mid-September to get to the governor's desk.


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