CWS 3.0: November 14, 2012

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Post Election: Prepare for Healthcare Reform

Last week’s election cleared the way for the Affordable Care Act, also known as healthcare reform. That means contingent workforce buyers could see costs rise as future provisions of the healthcare reform take affect — such as the employer mandate set for 2014.

“The Affordable Care Act is here to stay, at least for the near term,” says George Reardon, special counsel with employment law firm Littler Mendelson. “Because of the party-line history of the law, early repeal is out of the question with the Democratic Party controlling the Senate and the White House. There may be some tweaking or dropping of isolated provisions, as there already has been, but there are few viable challenges to its main features.”

Reardon says staffing suppliers will, to varying degrees, see higher costs from providing insurance or incurring penalties — and it’s likely they will want buyers to pay more to help cover those costs.

“Because these costs are so different from regular payroll taxes and other direct burdens, existing staffing contracts don’t clearly allocate them or provide for interim rate adjustments,” Reardon says. “So providers and buyers should meet now to agree on how such costs will be allocated — with negotiated results ranging from total payment by the buyers to total absorption by the providers.”

Staffing Industry Analysts’ research shows that, on average, staffing suppliers expect to pass on 60 percent of the extra costs under healthcare reform to buyers. On the other hand, buyers on average expect to absorb only 15 percent of the cost.

Penalties could be as much as $2,000 per year per multiplied by all of a company’s full-time employees for firms that don’t offer healthcare coverage or whose coverage doesn’t meet specific requirements. Those penalties begin in 2014.

“The [Affordable Care Act] statute mandates employer coverage or penalties only for full-time employees, testing full-time status monthly against a 30 hour per week average threshold,” Reardon says. “But for 17 months, IRS has dangled the idea of ‘look-back’ rules that would allow full-time status to be measured over periods of up to one year. Long look-backs would reduce employer penalty revenue and remove incentives for employers to offer prompt coverage to many low-wage, high-turnover workers. Post-election, the administration would seem to have no further incentive to bless look-back definitions that would have those effects, but if it does, both providers and buyers will be relieved of some of the looming financial cost.”

For more on the look-back period, click here.

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