A one-year delay in ACA’s employer mandate doesn’t mean you can ease up
By Craig Johnson
The government may have delayed the Affordable Care Act’s employer mandate by one year, but don’t breathe a sigh of relief just yet.
Other parts of the ACA are still on track — including a notice requirement coming Oct. 1. Many ﬁnal rules are also yet to be released as of this writing, and keeping on top of changes presents another challenge. In the meantime, staffing ﬁrms must deal with the lack of clarity.
Still, now is the time for preparations to continue and staffing ﬁrms to take advantage of the extra time allowed when the employer mandate, and associated potential penalties, was pushed back to Jan. 1, 2015.
But whatever you do, don’t count on the law going away.
“The unsavvy ones are going to think that school is out for a year,” says Richard Purtell, president and CEO of American Resource Staffing. “People think a miracle is going to happen; it’s not going to go away. It’s a law; it’s too far down the road.”
Purtell’s staffing ﬁrm is preparing to comply with the law and readying to take a consultative approach to helping customers. Other ﬁrms are also working on education eﬀorts despite the loose ends in the regulations.
Ed Lenz, senior counsel of the American Staffing Association, says staffing ﬁrms should use the extra time to ﬁrm up their compliance plans, especially those regarding insurance coverage and software for record-keeping and reporting.
At the same time, other parts of the law are moving forward. For example, the individual mandate has not been delayed (at the time the publication went to press). People will be required to buy healthcare insurance starting Jan. 1, 2014. The health insurance marketplaces are set to open Oct. 1 to sell coverage that will take eﬀect on Jan. 1, 2014.
Also by Oct. 1 of this year, employers will have to notify current and new employees about their employers’ health insurance oﬀerings, if any (see Sidebar 1 below).
Preparation is key. Take the members of the Affiliated Staffing Group, for instance. They have already been analyzing their workforce to gauge the impact of the ACA and are working on a deal to provide insurance to workers, says Roy Fazio, chairperson of the ASGroup.
The group is an organization of noncompeting staffing ﬁrms formed for the purpose of sharing best practices. Fazio is also owner of ProtocallGroup, a staffing provider based in Cherry Hill, N.J.
ASGroup has also been working with attorney Alden Bianchi for about a year to get prepared, Fazio says. Bianchi represented the Romney administration in connection with the 2006 Massachusetts healthcare reform act, upon which the ACA was based.
And ASGroup’s insurance deal is particularly interesting given what appears to be a dearth of oﬀerings for temporary workers.
Each ASGroup member company will have the ability to have their own experience and carve out what risk they wish to take. Final information on pricing wasn’t yet available as of writing. Almost all ASGroup members are analyzing their workforces to see how many people will be eligible for insurance under the look-back rule. The initial estimates are that approximately 18 cents to 31 cents per hour will be passed on to clients in increased pricing.
American Resource Staffing’s Purtell, who is a board member of ASGroup, says the insurance deal that ASGroup is considering for its temps calls for a self-funded program that includes re-insurance. This will involve another insurance company that will cover costs above a certain level. Getting the re-insurance ﬁrm on board involved the biggest difficulty and included educating the reinsurer on industrial staffing, Purtell says. What helped was the fact that the typical light industrial worker is a male aged 25 to 45 — characteristically a very healthy age group.
Purtell is familiar with healthcare reform, his ﬁrm has offices in New Hampshire as well as Massachusetts, where a law similar to healthcare reform is already in eﬀect.
“I see the value of being in compliance,” Purtell says. The more you are in tune with regulations, the more consultative you get, and the further you are from ﬁrms that compete just on price, he says.
He cites an example of his ﬁrm opting into E-Verify four years ago. The move helped serve customers seeking to solve concerns of employing illegal workers rather than placing a focus solely on price.
In a consultative relationship, when customers call, “it’s not about price, it’s about ﬁxing the problem,” Purtell says.
Learning to Teach
Other staffing ﬁrms are also pushing education — for their internal staﬀ and customers.
“We’ve been working internally to educate ourselves and then have an external consultant who is also working with us,” says Tony Bartenetti, executive vice president at Nelson, a staffing ﬁrm with headquarters in Sonoma, Calif. “My push has been to educate our ﬁeld team because there’s deﬁnitely questions coming from clients.”
However, many rules under the ACA have yet to be ﬁnalized, and the lack of clarity is a big concern, Bartenetti says. Questions also remain relative to the beneﬁts and cost of ACA-qualifying healthcare insurance that will be available for staffing ﬁrms to oﬀer their contingent employees.
The lack of clarity is a worry in many corners.
“You don’t have exact guidelines to go by,” says Diana Wright, owner and president of The Right Solutions, a healthcare staffing ﬁrm headquartered in Tontitown, Ark. And that’s a big problem, because it’s “very, very high risk if you get it wrong.”
Her company is looking at putting at least one person full time on compliance.
Another concern is the cost. The Right Solution has provided healthcare, vision, dental and life insurance to all her employees — even temporary workers — for free since 2002, Wright says. However, insurance costs just jumped by 44 percent at the start of summer, a higher increase than any time before the ACA.
Demand for healthcare staffing might go up as a result of the ACA, Wright says. However, a concern for the future is that care could be limited. Wright says she knows individuals in countries with socialized medicine such as the U.K. and Spain who experienced onerous bureaucratic hurdles in obtaining required care.
What’s Not Out Yet
One open question is the reporting rules. How will employers report to the federal government on who does or doesn’t receive healthcare coverage? As of this writing, the reporting rules are not yet out.
“That’s one of the things the administration says was a major driver behind the delay of the mandate,” Lenz says. “They will have an enormous impact on all employers.”
The rules were expected to be out late summer, and they will refer to the annual report that employers must ﬁle. The rules will likely require employers to report full-time employees, people with coverage, employees who opted out and the reports may require the data by month as penalties are assessed on a monthly basis, Lenz says.
Reporting rules will likely be introduced by the government in a proposed form. Then the government will take comments before issuing the ﬁnal rules.
Other rules that have not been released as of this writing include those involving nondiscrimination and auto enrollment.
Nondiscrimination rules will be aimed at preventing an employer from oﬀering a higher level of coverage to a group of higher paid workers such as executives. Auto enrollment requires ﬁrms with more than 200 full-time employees to automatically enroll employees into a healthcare plan.
Lenz says the auto enrollment clearly won’t go into eﬀect in 2014; the Treasury Department had announced such rules wouldn’t be ready for 2014 back in February 2012. There’s also a signiﬁcant repeal eﬀort against the auto enrollment rules.
One area staffing ﬁrms might check when getting ready is software. And although ﬁnal reporting requirements are not yet out, staffing software providers are already getting prepared.
Laura Schmitz, vice president of operations at staffing software provider Avionté, says her ﬁrm will be ready to put the new reporting rules in place once they are released.
The latest release from Avionté already includes the ability to track metrics for the Aﬀordable Care Act. The software will track workers through a look-back period as set by the staffing ﬁrm and alert the ﬁrm if a worker becomes eligible for beneﬁts. For ﬁrms not oﬀering healthcare insurance, the software will alert at the end of a 90-day administrative period when penalties take eﬀect. The software will also track breaks in service.
“We really want to make sure it’s as efficient and automated as possible for them,” Schmitz says. “They shouldn’t have to worry about manually entering this type of data to keep on track.”
The software will also track the data as if the employer mandate is still going through on its original date instead of being delayed a year.
In addition, it includes an exposure analysis report to see what a staffing ﬁrm’s liability would be if it takes the penalty or oﬀers insurance, and there is an electronic notice available to comply with the notiﬁcation requirement coming online Oct. 1.
Skinny Plans Strategy
Amid the ﬂurry of preparations for the ACA, some ﬁrms are also considering a strategy called “skinny” health plans, also referred to as limited-beneﬁt or nonminimum-value plans.
Such plans would oﬀer limited beneﬁts, but could enable employers to avoid the $2,000 penalty multiplied by all applicable employees for failing to oﬀer minimum essential coverage. “Although the $3,000 penalty for any worker that obtains subsidized exchange coverage will still apply, the skinny plan strategy relies upon the assumption that relatively few will do so,” writes Staffing Industry Analysts’ Research Associate Andrew Braswell in a report.
However, these plans remain a gray area.
“In addition to the risk that a higher-than-anticipated number of employees trigger the $3,000 penalty, there is a risk that regulators may move to disallow skinny plans,” Braswell writes. “Until written guidelines that speciﬁcally address the matter are issued, some uncertainty will persist.”
Some in the industry have also raised concerns that skinny plans might draw the attention of auditors.
The ACA is coming, and the federal government has requested that companies voluntarily follow the law in 2014 even though the employer mandate has been delayed.
Now appears to be the time to prepare despite the regulatory loose ends. The potential penalties, complexity of the law and questions that will surely come from customers leave companies little choice.
Craig Johnson is managing editor, staffing publications, at Staffing Industry Analysts. He can be reached at email@example.com.
By Oct. 1, 2013, employers will have to notify current and new employees about their employers’ health insurance offerings, if any. Model notices are on the U.S. Department of Labor’s website, but they will require employers to let employees know:
- About the existence of marketplaces to buy individual insurance, including: A description of services provided by the marketplace and how employees may contact the marketplace to request assistance.
- Notify employees that they may be eligible for premium tax credits if their employer’s share of total allowed costs of benefits under the plan is less than 60 percent.
- If they purchase a qualified health plan through a marketplace, the employee may lose the employer contribution (if any) to any health plans offered by the employer. And that those contributions may be tax deductible. Payments made for marketplace coverage are made on an after-tax basis.
Healthcare Staffing Could Gain
The Affordable Care Act will bring a number of changes, but one area of staffing that may see benefits is healthcare staffing.
“It’s going to drive more beneficiaries to seek medical attention, which in turn is going to increase the demand for healthcare services and that’s a good thing for medical staffing companies,” says David Savitsky, CEO of ATC Healthcare Services.
The personal mandate to have healthcare insurance is still set to kick in Jan. 1, 2014, and if more people have insurance, more people will seek healthcare services. However, whether all of the exchanges will be ready to operate is not so clear, and there is uncertainty as to how robust the enforcement of the individual mandate will be.
And while some companies are negative on the employer mandate, Savitsky says ATC has always provided health insurance to its workers for those working an average of 30 hours a week. “It’s not going to be a total sea change for us to provide health insurance because we’ve been doing it already,” he says.
Adversely, however, the ACA is a new program with a lot of regulations that are large, numerous and at this time are still being written. Savitsky says the American Staffing Association is doing a great job representing the interests and concerns of the industry. Still, regulators may not take the industry’s concerns into account as much as insiders would like. With the rules remaining to be finalized, there is great uncertainty and that is never a good thing for business.
Employer Penalties Recap
Rules for the employer penalty mandate are still in proposal form. Penalties start Jan. 1, 2015, after being delayed one year from the original start date of Jan. 1, 2014. Here’s a quick recap of what they include:
Firms with 50 or more full-time equivalent workers may face a penalty if they do not provide healthcare insurance. The number of employees would be based on full-time equivalents.
Firms that do not provide insurance — or that offer coverage to less than 95 percent of their full-time workforce — will face a possible penalty of $2,000 per year multiplied by all their full-time employees (not full-time equivalents) minus the first 30 employees. At least one employee must receive a tax credit to buy health insurance in order for this to take effect. A full-time employee is someone who works at least 30 hours week.
If an employer offers insurance, but it is not affordable or does not provide minimum value, the penalty will be up to $3,000 per year for each full-time employee who receives a tax credit to buy health insurance. Employees receiving Medicaid would be excluded when the penalty is calculated. This penalty would also be capped, so firms would not pay more in penalties than if they offered no insurance.
A “look-back” safe harbor could significantly decrease the number of employees deemed full-time and eligible for a penalty. It allows an employer to use a look-back measurement period of between three months and 12 months to determine whether an employee is full-time or part-time. If a worker is full-time during the look-back measurement period, that worker would continue to be considered a full-time employee for a subsequent stabilization period even if his or her hours fall to part-time. The stabilization period would be the same length as the look-back but not less than six months.
For the look-back rule, employers would have to decide whether newly hired workers are full-time employees or variable-hour employees. A worker is variable hour if the employer cannot reasonably determine on the worker’s start date whether the employee will work an average of at least 30 hours a week or will work full-time hours for only a limited time.
Regulators already ruled that staffing firm temporary employees won’t automatically be considered variable hour employees — that may mean some temporary employees working full time for longer periods of time could qualify for penalties. The American Staffing Association has asked the government for a safe harbor that would allow staffing firms with at least 100 percent turnover to consider every worker that is assigned for a period of less than six months to be presumed a variable hour employee, says Ed Lenz, senior counsel of the American Staffing Association. It “would allow staffing firms to use a rule of thumb that would give them the benefit of doubt regarding their variable hour determinations.”