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The U.S. Supreme Court’s upholding of the Patient Protection and Affordable Care Act, also known as healthcare reform, drew concerns from business groups and others. The law is certain to impact the staffing industry.
George Reardon, special counsel at employment law firm Littler Mendelson, said the law will cause the cost of contingent labor to rise as employer penalties take effect in 2014.
Staffing firms also shouldn’t count on a repeal of the law, Reardon said. Republicans would have to win both houses in the election (including a 60-vote, filibuster-proof Senate) and the presidency and would also have to resist pressure to keep popular pieces of the law.
However, the National Federation of Business said it plans to continue to fight against healthcare reform. The federation and 26 states were parties to the lawsuit.
“Under PPACA, small-business owners are going to face an onslaught of taxes and mandates, resulting in job loss and closed businesses,” Dan Danner, president and CEO of the National Federation of Independent Business, said in a statement. “We will continue to fight for the repeal of PPACA in the halls of Congress; only with PPACA’s full repeal will Congress have the ability to go back to the drawing board to craft real reform that makes reducing costs a number one priority.”
The Supreme Court’s opinion today did not include the employer mandates portion of the law. The complex opinion concerned the individual mandate, which requires individuals to buy health insurance starting in 2014 or face penalties. The court’s opinion also covered a portion of the law that allowed the federal government to pull all Medicaid funding for states if they didn’t expand Medicaid coverage to those making up to 133 percent of the federal poverty line.
In short, the court upheld the individual mandate on the grounds that it could be thought of as raising taxes for those who don’t buy healthcare insurance.
“The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax,” according to the court’s opinion written by Justice Roberts. “Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”
Removal of the mandate might have invalidated the entire healthcare reform law.
In addition, the Supreme Court ruled against allowing the federal government to withdraw all Medicaid funding from states that don’t allow expanded Medicaid coverage.
The court’s opinion ran 193 pages.
The decision paves the way for employer penalties to take effect in 2014.
The law requires that employers with at least 50 full-time equivalent employees provide a certain level of healthcare coverage or pay a penalty. The penalty is $2,000 multiplied by the number of full-time workers (minus 30) if any employee receives a federal subsidy to purchase healthcare insurance, according to the April 2010 issue of the Legs & Reg Advisor.
If an employer offers coverage that is deemed “unaffordable” because the employee has to pay more than 9.5 percent of his or her income, or the employer contributes less than 60 percent of the actuarial value of the plan, the employer must pay $3,000 for each full-time employee getting a federal subsidy up to a cap of $2,000 multiplied by the number of full-time employees.
At one time a “look-back” period was discussed that would allow staffing firms to track how many full-time employees they have — for the purposes of calculating possible penalties under healthcare reform — for up to an entire year instead of on a month-to-month basis. This could drastically reduce the number of workers for which a staffing firm could be penalized. A year-long look-back period would allow a staffing firm to be penalized for a worker only if that worker was on the job full-time for a year.
However, Reardon said staffing firms shouldn’t count on long look-back periods for defining who is a full-time employee because they are opposed by the Service Employees International Union and others.
Anti-discrimination portions of healthcare reform might also impact staffing firms’ ability to offer one type of healthcare insurance to internal workers and another type of insurance to external, temporary workers.
Reardon advised that firms should prepare for nondiscrimination rules when they are published.
For more on penalties, click here.
In the wake of the Supreme Court’s ruling, Reardon also noted:
- Staffing firms should analyze the patterns of their contingent workforce.
- Although qualifying insurance for temporary workers is theoretically an option, it may be unfeasible because of unavailability and unreasonable cost.
- Staffing firms might consider ways to mitigate penalties through workforce reallocation and management strategies such as franchising, branchising, job-sharing and term limits.
However, some in the staffing industry say the new law could increase business.
AMN Healthcare Services Inc. (NYSE: AHS) in its 10-K filing earlier this year with the U.S. Securities and Exchange Commission said the law could increase demand for its services.
“It is widely anticipated the Patient Protection and Affordable Care Act of 2010 (in its current form), will result in a substantial increase in the number of newly insured Americans that will require access to care, increasing the need for physicians, nurses and other allied health professionals in various healthcare settings in and outside of the traditional acute-care hospital, which could increase demand for our services,” according to the 10-K.