Preparing for Obamacare Compliance
The purpose of the Patient Protection Affordable Care Act, otherwise known as “Obamacare” is to provide affordable healthcare to all Americans and minimize the exceeding growth in healthcare spending. In order to provide such comprehensive and affordable coverage, the law implemented an “employer mandate” which placed a responsibility on employers to offer minimum essential coverage to full-time employees.
Under the law, all healthcare plans must be comprehensive and contain a number of different services available to insureds, which may have not necessarily been accessible in the past (i.e. no denial for pre-existing conditions, access to preventative care, no lifetime limits on essential health benefits.)
While the legislation has received both positive and negative criticism, as well as undergoing numerous changes and clarifications, it is inevitable that as of 2015 in the eyes of the law employers owe a duty to their employees to offer affordable and comprehensive medical coverage.
Employer Mandate
An employer mandate is set to be effective starting January 1, 2015, and will affect employers as follows:
Large employers (100+ employees): required to offer affordable coverage to at least 70% of their full-time employees. By January 1, 2016 large employers must offer coverage to 95% of their full-time employees.
Mid-Sized Employers (50-99 employees): will not be subject to the mandate until 2016 as long as certification is provided that they will not reduce workforce below 100 employees in order to qualify for the extension.
Small Employers (less than 50 employees): will not be subject to the mandate but are still responsible for notifying employees of available healthcare exchanges and the marketplace.
Defining eligibility
In determining which employees must be offered coverage, employers must be aware of how exactly a “Full-Time Employee” or “Full-Time Employee Equivalent” is defined under the law. Full-time employees, or equivalents, are defined as any employee who works 30 hours or more per week on a regular basis (a period of 13 weeks is often used to determine a “regular basis”).
However, if it can be determined at the start of employment that an employee is expected to work 30 or more hours per week they will be considered a full-time employee regardless of any waiting period.The staffing industry, in particular, is often faced with issues arising from employing “variable hour employees” or employees performing work on an irregular or indeterminable basis. In determining if an employee is “variable hour” an employer should determine based on past or future projects worked if the following apply:
It is unable to be determined the average number of hours per week the employee expected to work or does in fact work
Worker has the right to reject future offers
Engage in periods with no contract assignments
Assignment length typically varies
Assignments typically last less than 13 weeks
Shared Responsibility
In order for employers to comply with the mandate, there must be a shared responsibility between the employer and the employee or at least a portion of the burden must be paid by the employer resulting in plans that are affordable and provide minimum coverage.
Determining affordability: The employer share of the premium costs associated with coverage must not cost employees more than 9.5% of the individuals’ annual household taxable income.
Determining minimum coverage: Coverage must be equal to 60% of the “actuarial value” which is the true value of the plan based on the average persons’ costs on healthcare spending. The actuarial value is determined by a number of advanced factors and can often be met if the employer covers at least 50% of the coverage.
In addition to the employer's responsibility, there is a responsibility on the employee. Beginning in January of 2014, individuals were required to obtain medical coverage either through an employer-sponsored plan or coverage through the private insurers or government-sponsored healthcare marketplace. Failure to obtain coverage places a fine on the individual when they report their taxes.
Penalty
If the employer fails to comply with the employer mandate, they can incur significant penalties. Failure to offer coverage to 70% of the full-time workforce as required, will result in the employer paying $2,000 per full-time employee who has not been offered coverage. (Excluding the first 80 employees in 2014, by 2015 excluding the first 30 employees.)
Employers offering coverage but who have one or more full-time employees receiving tax credits via a health exchange are subject to costs of up to $3,000 per employee who receives a subsidy. In some cases, an employer may feel it more beneficial to take the risk of having to pay penalties versus the cost of having to provide employer sponsored healthcare, but it is important that an employer is very clear with the potential for penalties and repercussions.
Effects on Staffing Industry
The nature of the staffing and contracting industries lends itself to temporary workers who may not necessarily seek employer sponsored healthcare coverage. However, in light of the recent implementation of the ACA, it is important that all employers, regardless of size, be well aware of the effects non-compliance could potentially have.
In order to avoid the compliance and reporting issues that come along with Obamacare, companies may find it beneficial to engage in third-party staffing and contractor management companies, such as PGC, to act as the employer for their workers. Essentially, the increased requirement for additional compliance and management could significantly increase business in the staffing industry. If you would like to discuss how PGC could help your company become compliant with the changes the ACA will bring please contact us here.
Disclaimer: All information written here is for general informational purposes only and is not intended to be a substitute for professional and/or legal services.