What does the Affordable Care Act mean for businesses?

While you’ve likely heard a lot about the Patient Protection and Affordable Care Act in the media, the question on everyone’s mind is, “What does this mean for my business?”

 

In the staffing industry, the answer is complicated.

 

Beginning in 2014, the U.S. government will require all citizens and legal residents to have qualifying health coverage or pay a penalty. In addition, employers with at least 50 full-time equivalent employees will be required to provide health insurance or pay a penalty. And for staffing firms, there is no distinction between temporary and permanent employees. Penalty amounts are based on:

 

  • Whether the business offers coverage

 

  • Whether any employees qualify for government subsidies to aid in the purchase of health insurance.

 

In addition, coverage must be deemed “affordable” under the act, meaning employees cannot pay more than 9.5 percent of their income toward coverage and the employer must contribute at least 60 percent of the actuarial value of the plan or pay a penalty.

 

The law poses an enormous challenge for staffing firms, because there are already few options available for covering temporary workers and the PPACA outlaws traditional “mini-med” plans that impose annual limits on care, which have been adopted by many staffing firms.

 

The Affordable Care Act poses a financial problem for temporary staffing firms, as the cost to provide health insurance to these employees is typically high. Many staffing firms are not accustomed to paying the cost of health plans, as temporary workers have traditionally chosen to obtain coverage elsewhere, even if their employer offered it.

 

Another problem arising for the PPACA is that anti-discrimination policies mean that staffing firms may not be able to offer one type of insurance to full-time office workers and another to temporary employees.

 

So what options are available to staffing companies?

 

  • Pay the penalty. Depending on your cost to insure your temporary employees, it might cost less to simply not insure them and pay the penalty.

 

  • Reorganize your workforce. To avoid exceeding the 50-employee threshold, limit your temporary employees to part-time status and hours. Part-time employees may be aggregated to determine full-time equivalent employee numbers; however, you are not required to offer part-time employees health insurance under the law.

 

  • Offer the most economical plan for your staffing firm. High-deductible plans traditionally reduce employer costs. Just make sure the plan falls under the “affordable” limitations allowed under the law.

 

  • Incorporate limits. Annual dollar limitations on visits are not allowed, but you can impose visit and dollar-per-visit limits to corral costs.