Employers face complex new measures under mandate

By Andrew Hedlund -- Medill News Service   |   April 24, 2013 at 7:27 PM
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WASHINGTON, April 24 -- As the new health care law inches closer toward full implementation, the nuts and bolts are unclear, leaving businesses and labor unions worried that regulations may be too complex.

At an Internal Revenue Service public hearing Tuesday, representatives from businesses and labor unions expressed concern about proposed regulations for the employer mandate, particularly those concerning temporary employees.

The employer mandate requires business with 50 or more full-time workers to provide health insurance or face a fine of $2,000 per employee after the first 30 employees. Smaller firms may qualify for tax credits if they want to offer insurance.

Determining who qualifies

In determining who is eligible for health insurance, employers use a “look-back” period, meaning the firm counts back a certain number of months — no less than three, no more than 12 — and averages the number of hours an employee worked.

If the average number of hours worked exceeds 30 hours, the employer must offer health insurance to that employee for a minimum of six months, said Alden J. Bianchi, a benefits law specialist at Mintz Levin.

The “look back” provision is used specifically for “determining who is a full-time employee,” said Elise Gould, a health care economist at the labor union-backed Economic Policy Institute, adding that the measure is designed to give employers flexibility.

Temporary workers and “churning”

The speakers at Tuesday’s hearing were concerned about temporary workers due to the lack of stability these types of jobs provide. A real possibility exists that these employees could ping-pong between employer-sponsored health insurance and the state-based exchanges the new law sets up.

While this is an imperfect system, Gould said, “churning” is better than letting these workers go long periods without health insurance, as was the case before the Affordable Care Act.

“What people really care about are providers,” she said, adding that as long as temporary workers have a “usual source of care,” the system will be manageable, but if they have to switch doctors, it could cause.

Seth Perretta of the American Benefits Council suggested attempting to offer continuous coverage for a year.

The hidden provision

Explaining that businesses with 50 or more full-time employees are required to offer health insurance is the easiest way to explain the employer mandate, but it leaves out a key provision.

Under that provision, part-time workers’ hours are added to the accumulative total of how many full-time employees a business employs.

If a business has 10 full-time employees and enough part-time employees that, when their hours are added in, the total is the equivalent of 50 full-time employees, the firm must offer those employees working more than 30 hours a week benefits.

This extra requirement means more businesses will be subject to the mandate than only those with 50 or more full-time workers.

Determining the exchanges’ tax credit

A large selling point of the Affordable Care Act was the tax credit offered to individuals and families who will get their insurance from the new state-based exchanges.

Gould, the health care economist, explained that determining the amount of an individual tax credit is complicated. There is no federal standard for what year’s salary to use as a baseline; instead, states can decide.

Some may choose to use the amount of income reported on the previous year’s tax returns, while other might choose to use numbers from the current year’s salary when providing the tax credit.

A temporary industry

Willa Fawer of Hire Counsel, which employs lawyers on a temporary basis to sift through electronic data for cases, said her company finds the employer mandate particularly onerous.

Due to the low profit margins of the e-discovery industry, Fawer said her company may not be able to afford health care for all workers who are counted as full-time employees because it’s so hard to determine how many people even meet this standard.

Should e-discovery firms be required to provide health care for all full-time workers, they may be forced to outsource the jobs to India and the Philippines, she said.

“Our business model revolves around the fact that employees come and go,” Fawer said.

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