The Patient Protection and Affordable Care Act (PPACA), most commonly known as “Obamacare” or the Affordable Care ACT (ACA), is a US federal statute that was signed into law by President Barack Obama on March 23, 2010. Combined with the Health Care and Education Reconciliation Act, this is the most significant government regulation regarding the U.S. healthcare system since Medicare and Medicaid which came about in 1965.
The Affordable Care Act applies to all firms that employ 50 or more people. Employers not offering health insurance must pay a shared responsibility amount if the government has to subsidize an employee’s healthcare. For the staffing industry, this represents extensive recordkeeping, reporting and even process adjustments. One of the biggest issues is the extensive set of rules, the tenuous nature of the requirements and changes.
Based upon what we know now, one thing is clear – staffing businesses will have to produce an extensive set of reporting in order to understand their financial position and to figure out who is eligible. The caveat is that in order to get the reporting, the appropriate system data must be available. Companies that store this type of data electronically will simply have to design the appropriate reporting. If the data is currently not being stored electronically the problem is of a larger consequence. Staffing systems not being fully utilized will have to be analyzed and operations processes will need to be altered to ensure that the data is being entered and managed within the staffing software solution. If not the costs could be exorbitant and ultimately unaffordable.
Interesting statistics were gathered by a Reuters-lpsos poll during June 2012. 56% of Americans overall were against the law, 44% supporting it. 75% of Democrats, 27% of Independents and 14% of Republicans favored the law. 72% supported requiring companies with more than 50 employees to provide insurance to their employees. The big question is how does a staffing company fit into the equation? Many companies such as restaurant franchises, colleges and even some states are limiting part-time employees to working no more than 29 hours per week.
Some authorities predict that ACA could ultimately be a boon for temporary staffing companies. Companies will decide to hire employees through a temporary staffing agency in order to avoid any health-cost obligations that they may incur as the direct employer. We know that the Affordable Care Act is generating billions for insurers, hospitals and even technology vendors. But could it prove to do the same for staffing companies? In a regulation issued last year, the IRS left an opening for employers of “variable hour” labor such as temp agencies. If it is not clear upon hiring that an employee will consistently work more than 30 hours weekly, companies will get up to 12 months to figure out if the employee is full time and qualifies for health benefits even if the employee does in the final analysis work full time. Statistically, the majority of temps do not last 12 months although in specific niche roles this is the norm.
For temporary workers, even if they work full time on a weekly basis for a number of months, they would not be eligible for insurance because of the look-back period. In that respect, the rules were written very favorably in view of the temporary industry. A large number of temporary services offer health insurance coverage for steady employees so it is likely that besides the increased recordkeeping and reporting, temporary service firms may find that it is “business as usual”. A temporary firm may get more business to help companies manage temporary workers when companies are daunted by the complexity of the Affordable Care Act. This means that temporary service companies that are well-prepared will prosper.
How does one prepare? It all starts with information. Know the reporting requirements that will help manage this process and make sure that the information is being entered into your staffing software solution and retained. Firms that are lax in data management will have a more difficult time because they are essentially starting at level one. Companies that have rich databases and manage placements utilizing their software to the full extent should have fewer issues. For firms that have the data, the only thing to be done is the creation of necessary reporting which more than likely will be handled by their staffing software vendor.
What reporting can be helpful and should be included in an ACA Reporting Model?
- “Census Reporting”. This type of reporting will list all current employees and include rehire date, termination date, deductions and other important information. Usually insurance companies will provide a format.
- “Initial Measurement Period”. This type of report will list all variable hour employees who worked at least 30 hours over the initial measurement period. These are the employees that the temporary agency must offer insurance to. There is a begin/end hire date with a selection of a look-back period. It will determine if the lowest cost health care plan is unaffordable (exceeds 9.5% of the employee’s wages). It also includes information on hourly rates based on average hours worked and other items in order to determine eligibility.
- “Minimum Hours Report”. Could be helpful to list employees who have hours less than or equal to the value entered based upon a specific timeframe.
- “Eligibility Limitation Report”. The purpose of this report is to check employee hours periodically in order to determine if they are nearing health coverage eligibility. Would include begin/end hire dates and look-back.
- “Health Care Cost Calculator”. This type of report can display the healthcare cost of the temporary employee based on a per hour basis. This can be useful for firms that intend to recapture at least part of the cost by billing it to the customer. This type of report should break out cost of insured employees and cost of penalties for employees who purchased insurance from a state exchange (excluding Medicaid eligible employees).
- “Pay vs. Play” Calculator. This report can help employers determine the cost of providing health coverage vs. not providing coverage and paying the fine.
- “Break in Service Report”. Indicates who has not worked in 26 consecutive weeks; who has not worked any hours in 4 weeks; length of the previous assignment, etc. Helps to check against the “Break in Service Rule”.
Managing an “on-demand” workforce will be very important for financial modeling using predictive statistical analysis. Managing talent through projects will be critical. Of course it is vital to keep in mind that final regulations will come as late as January 1, 2014.
Image courtesy of dream designs / FreeDigitalPhotos.net
This article made an appearance in staffdigest magazine. www.staffdigest.com
Terri Roeslmeier is President of Automated Business Designs, Inc., software developer of Ultra-Staff staffing software for the staffing and direct hire industry. Ultra-Staff is a staffing software business solution with components for front office, back office, mobile and web suite. For more information on Ultra-Staff go to www.abd.net.
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