What It Actually Costs to Keep Part-Time Workers Off Your Health Plan

Excluding part-time workers from your health plan doesn't save what you think it saves. One turnover event usually costs more than a year of coverage. The savings you booked on premiums often reappear as recruiting, training, and lost productivity.

What does excluding part-time workers actually cost you?

It costs you turnover, and turnover is expensive. Most CFOs treat part-time benefits as a cost to avoid. The real question is what you're already paying because those workers are excluded.

SHRM estimates replacing an employee costs 50% to 200% of annual salary, depending on the role. For a part-time worker earning $28,000 a year, that's $14,000 to $56,000 per departure. Not a rounding error.

Now count how many part-time workers you turned over last year. Multiply by the low end of that range. That number is already in your budget, you're just calling it something else.

Is coverage really cheaper than turnover?

Yes, and it usually isn't close. Employers often exclude part-time workers to avoid $150 to $300 PEPM in coverage costs. That's $1,800 to $3,600 per worker per year.

Set that against a single turnover event at $14,000 minimum. Then add onboarding, training time, and the productivity gap while a new hire ramps up. The premium you skipped looks small next to that.

Quit rates run highest in low-wage, part-time-heavy industries like retail and food service. Bureau of Labor Statistics JOLTS data tracks those quits by industry. If your part-time roles sit in those categories, you're funding churn you don't account for.

Say a part-time worker stays 18 months longer because they have coverage. The cost of that coverage is $2,700 to $5,400. The cost of replacing them once is $14,000 or more.

How does the ACA employer mandate change the math?

It can add a penalty on top of the turnover cost. The mandate applies to workers averaging 30 or more hours per week at employers with 50 or more full-time equivalents. IRS guidance on employer shared responsibility is specific here.

Misclassifying hours or structuring schedules to dodge the threshold creates penalty exposure. The 2026 penalty for failing to offer coverage is $3,340 per full-time employee, assessed after the first 30 employees, if any full-timer gets a subsidy on the exchange. That's not per part-timer, but it stacks fast at scale.

So you're potentially paying the penalty, absorbing the turnover cost, and still missing the retention benefit. Three losses, no wins.

Some employers cap part-time hours below 30 to avoid the mandate. That's legal. It doesn't make the turnover math disappear, it just shifts the cost from premiums to recruiting.

What are the lower-cost ways to cover part-time workers?

You don't have to offer the rich PPO you give full-time staff. A few designs pencil out at much lower cost. Each one lets you treat a 20-hour worker differently from a 40-hour salaried employee.

• Level-funded or reference-based pricing plans for a separate part-time tier, usually lower PEPM than a fully insured full-time plan. See our funding models guide for how these compare.
• Individual coverage HRAs, where you set a defined dollar contribution and workers buy their own plan. DOL guidance on ICHRAs confirms you can offer these to part-timers as a separate class with a different contribution than full-time staff.
• Direct primary care memberships, running $50 to $100 PEPM, paired with a catastrophic wrap policy.

EBRI research on contingent workers has tracked the benefits gap for this group for years. Coverage exclusion for part-time workers stays common across private sector employers. That gap is a cost signal, not just an equity issue.

How do you run the numbers before your next renewal?

Start with two pulls. Get your part-time headcount and your 12-month turnover rate for that group. Then apply the SHRM replacement cost range to it.

Then price a basic ICHRA or level-funded option for the same population. If the turnover cost exceeds the coverage cost, you have your answer. Most employers who run this find it isn't even close.

The question isn't whether you can afford to cover part-time workers. It's whether you can afford to keep not doing it.

Frequently asked questions

Do I have to offer part-time workers the same plan as full-time staff?

No, you can build a separate, lower-cost tier for part-timers. Level-funded plans, reference-based pricing, ICHRA, and direct primary care all let you set a different benefit and contribution than the full-time plan. Nothing requires a 20-hour worker to get the same PPO as a 40-hour salaried employee.

Can I offer an ICHRA only to part-timers?

Yes, federal rules let you treat part-time employees as their own class with a contribution that's different from full-time staff. There are minimum class-size rules to watch, which we break down in our guide to ICHRA employee classes. Design the class carefully so it holds up under the affordability and notice rules.

Does capping hours below 30 eliminate the cost?

No, capping hours keeps you under the ACA mandate, but it doesn't touch the turnover math. The premium cost you avoid tends to come back as recruiting, training, and lost productivity. You've moved the cost, not removed it.

What's a cheap way to add coverage without a full medical plan?

Direct primary care is one option, with memberships that run about $50 to $100 PEPM and cover routine and preventive care. Employers often pair DPC with a catastrophic wrap, and it works well for hourly and part-time populations. Our piece on direct primary care for a manufacturing workforce shows the ROI math.