The Patient Protection and Affordable Care Act’s (ACA) employer mandate — and its effect on contingent workforce buyers — is a hot topic, despite the deadline for its implementation being pushed back to 2015. While the mandate is delayed, the issues regarding implementing and paying for healthcare reform in the contingent workforce market have not changed; buyers and suppliers must continue to be diligent in learning the costs and preparing now for 2015.
We have noticed a definite disconnect in buyers’ and suppliers’ expectations regarding who will pay for the increased costs. According to the 2012 Contingent Buyer Survey, most buyers expect to absorb none of the costs of healthcare reform. IT buyers, tech/telecom and buyers with 10 or more suppliers are the most likely to think their suppliers will absorb healthcare reform’s costs. Meanwhile, data from Staffing Industry Analysts’ annual staffing firm survey shows 60 percent of staffing firms expect to pass on the cost of healthcare reform to buyers.
The costs are just the tip of the iceberg in terms of figuring out how and when temporary employees of staffing suppliers get benefits. There are basically two buckets we can look at:
Bucket 1: Exempt from ACA employer mandate. Staffing firms that employ fewer than 50 full-time equivalent employees. These are exempt from the employer penalties under the ACA, but the companies must still track workers and prove the exemption. Additionally, for companies with more than 50 full-time equivalents, current guidance suggests there will be a category of temporary labor of a short-term character that will also be exempt (possibly for assignments as long as three to six months.)
Bucket 2: Not exempt from ACA employer mandate. Staffing suppliers would face a penalty or have to provide qualifying benefits. The issue here would be cost minimization.
In Bucket 1, no direct costs should be incurred by buyers due to healthcare reform. In Bucket 2, cost minimization becomes the issue for buyers. These staffing suppliers — particularly of higher skilled personnel — may already provide some level of benefits to recruit and retain their employees. The bad news is that if they are required to increase the level of benefits, the related costs will most likely be passed on to the buyers in some form.
As far as long-term temporaries, buyers should focus on strategically determining who is core and who is truly ancillary and then do the cost analysis. Again, many of these workers may already have benefits through their supplier, but while you and your supplier partners have this opportunity to focus and strategically look at the larger population, this will be a good time to zero in on those long-term temporaries and find out why they are long-term and if there is a business case to absorb them into your organization.
Familiarize yourself with the plans your suppliers offer and make sure they meet federal requirements. It appears the IRS will take information on healthcare insurance and determine if a company owes a penalty then send a bill to the company. That could mean the staffing supplier passes an unexpected cost back to you.
Companies that do not provide healthcare to their full-time employees are subject to a $2,000 fine per all their full-time employees (after the first 30 workers).
Another possible question is whether a supplier’s coverage qualifies as “affordable” (costs the employee no more than 9.5 percent of a worker’s “household income” — later clarified as the income as stated on the employee’s W-2). If a worker receives a subsidy to buy healthcare insurance through an exchange, the employer may be fined $3,000 per year for that employee even if the employer does offer its own coverage.
Some staffing firms are considering offering “Skinny Med” plans — a cheaper, limited form of insurance that may cover only doctor visits and prescriptions. Such plans would allow firms to avoid the penalty of $2,000 multiplied by all of a company’s full-time workers. However, employers would still be on the hook for a penalty of $3,000 per year for each employee that receives a tax credit to buy insurance.
So what are buyers doing in the future as a result of ACA? Our buyer survey results say that buyers will be using fewer independent contractors and more statement-of-work consultants (SOWs) and outsourced workers.
Most buyers also say they will engage more full-time employees, offshore workers and agency temps, but not a significant amount. Only industrial buyers have said they will use more temporaries as a result of ACA due to the short-term nature of industrial work. No other buyer segment surveyed predicted a marked increase in temporary usage overall.
While it looks like we have some breathing room, now is the time to prepare and look at associated costs. Our CWS Council is preparing a questionnaire for members so that they are asking the right questions when preparing for healthcare reform with their staffing partners. Additionally an upcoming buyer webinar will provide some much needed clarity from both the legal and provider perspective on July 18. While regulators continue to determine whether the “Skinny Med” is a viable option and finally determine what truly qualifies as long-term and short-term for temporary employees, stay informed and work with your staffing partners and MSP now to prepare for 2015.