Denver Staffing Agency - “Supreme Court Upholds Obamacare—Next Steps for Staffing Firms" - Part 1

  • Posted by: J. Kent Gervasini |
  • 8/2/12 |
  • 2:45 PM
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Denver Staffing Agency - “Supreme Court Upholds Obamacare—Next Steps for Staffing Firms" - Part 1

On July 12th, J. Kent’s Staffing Managers  and Denver Recruiters participated in an American Staffing Association (ASA) training webinar titled, “Supreme Court Upholds Obamacare—Next Steps for Staffing Firms.” Although J. Kent Staffing has been tracking this legislation for more than a year, the seminar served notice that the impact of financial and reporting costs will significantly affect all Denver employers to include Denver staffing agencies.

Webinar Panel Experts

  • Edward A. Lenz, Esq. -  ASA Senior Vice President, Legal and Public Affairs
  • James A. Essey - CEO TemPositions Group of Companies, a multi-million dollar east coast staffing agency
  • Alden J. Bianchi, Esq. -  Member, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC. Bianchi is Practice Group Leader of the 80-year-old firm's Employee Benefits & Executive Compensation Practice and a Member in the Employment, Labor & Benefits Section

ASA Reviews Supreme Courts’ 5-4 Ruling
In this Webinar, ASA reviewed the Supreme Courts’ 5-4 ruling to uphold the Patient Protection and Affordable Care Act (PPACA), shared their thoughts on the steps all staffing firms should be taking now, and explained the key factors in determining costs for employers. Stressing to staffing agencies to start planning now, ASA suggested a major decision employers will have to make is whether or not they will offer health insurance coverage to all full-time employees, as those employers who do not offer coverage will incur a penalty.

Although much of the legislation has been finalized, based on the recent discussions during the week of July 30, 2012 with the Obama administration, ASA’s legal team now expects that official guidance clarifying the definition of full-time employee under the Affordable Care Act and “look-back proposal” will be released by the end August 2012.

For purposes of this introduction, the following definitions will be helpful to Denver employers as they relate to the key factors, and major regulations found in the United States federal statute signed into law by President Barack Obama on March 23, 2010.

Definitions
Affordable Plan Offered
The Patient Protection and Affordable Care Act (PPACA) define Affordable Plan Offered to mean that the employee’s premium contribution to a single-only plan does not exceed 9.5% of W-2 wages. 

Full-Time Employee (FTE)
Employees working an average of 130 hours per month (1,560 hours annually) or more.

Health Insurance Exchange (HIX)
A health insurance exchange is a set of state-regulated and standardized health care plans in the United States, from which individuals may purchase health insurance eligible for federal subsidies. All exchanges must be fully certified and operational by January 1, 2014 under federal law.

The HIX Acronym
HIX (Health Insurance Exchange) is emerging as the de facto acronym across state and federal government stakeholders, and the private sector technology and service providers that are helping states build their exchanges. The acronym HIX differentiates this topic from Health Information Exchange, which has been designated HIE.

Look-Back Period
Official guidance clarifying the definition of full-time employee under the Affordable Care Act and “look-back proposal” will be released by the end August 2012.

Patient Protection and Affordable Care Act (PPACA)
The Patient Protection and Affordable Care Act (PPACA), also known in generic terms as “health care reform,” and informally referred to as Obamacare, is a United States federal statute signed into law by President Barack Obama on March 23, 2010. Together with the Health Care and Education Reconciliation Act, it represents the most significant regulatory overhaul of the U.S. healthcare system since the passage of Medicare and Medicaid in 1965.

PPACA is aimed primarily at decreasing the number of uninsured Americans and reducing the overall costs of health care. It provides a number of incentives, including subsidies, tax credits, and fees, to employers and uninsured individuals in order to increase insurance coverage. Additional reforms are aimed at improving healthcare outcomes in the United States while updating and streamlining the delivery of health care. PPACA requires insurance companies to cover all applicants and offer the same rates regardless of pre-existing conditions or gender. The Congressional Budget Office projected that PPACA will lower both future deficits and Medicare spending.

Premium Tax Subsidy/Credit
A tax credit offered to employees within defined federal poverty levels to assist in the purchase of their health insurance through each state’s Health Insurance Exchange (HIX). Note:  Employees will not be eligible for a tax subsidy (and employers won’t be subject to a penalty), if employer’s plan offered is “affordable.”

What Employers are Affected by Obamacare?
Only employers with 50 or more full-time equivalent employees are subject to this legislation.

To Offer or Not Offer Coverage – Key Factors

  • Cost of Coverage vs. Cost of Penalties
  • Scope of benefits
  • Employer contribution, if any
  • Employee participation
  • Number of full-time employees
  • Employees excluded under lawful plan waiting periods
  • Employees getting tax subsidies
  • Cost of making employees whole if employer drops coverage
  • Tax deductibility of premiums vs. non-deductibility of penalty
  • Availability of plans for temporary employees – effect of non-discrimination rules on “two-tier” plans

Employer Reporting – Important Dates
Cost of health coverage on W-2
Beginning in January 2012, employers providing health coverage will report the cost of coverage by both the employer and employee on employee W-2 forms.

Notice of Exchange Coverage Option
As of March 1, 2013, employers must notify employees in writing at time of hire (current employees not later than March 1, 2013) of state HIX, services provided, how to contact their state’s Exchange for assistance, and their potential eligibility for tax subsidy.  State Exchange is a place where employees can compare private health plans and check for eligibility for tax credits.

Look-Back Proposal for Defining “Full-Time” Employees
If the proposed look-back regulations are solidified by the end of August 2012 they:

  • Could require employees to work up to 12 consecutive months (average 130+ hours per month/1,560 per year) before being considered “full-time” for purposes of offering health insurance coverage or paying penalties
  • Would substantially reduce employer penalties, if the 12 consecutive months ruling is approved

Estimating Full-Time Employees – Current
Assume 12 consecutive month look-back:

  • Full-time employees in 2009 will be deemed full-time in 2010, therefore, employer must offer coverage or pay penalties as long as employee “remains employed”
  • Employees who did not work full-time in 2009 but who did work full-time in 2010 would be considered full-time in 2011

Estimating Full-Time Employees - Newly-Hired Employees

  • Count employees first hired on or after January 1, 2010
  • Track hours monthly and identify full-time employees in 2010 based on an average of 130+ hours per month during the applicable look-back period (three, six or 12 months)
  • Full-time employees in applicable look-back will be deemed full-time in a subsequent period as long as employee “remains employed”
  • Employees who did not work full-time in the first look-back but who work full-time in the second would be deemed full-time in the third look-back

Employers with 50+ FTEs
Important:  Employers will not be subject to a penalty, if plan offered is “affordable”; therefore, employees will not be eligible for a tax subsidy.

If employer does not offer coverage

Penalty
 Penalities are NOT Tax Deductible

$166.67 per month ($2,000 annually) per employee on all full-time employees (minus 30).


If employer does offer coverage but the plan is not affordable to all FTEs

Penalty
 Penalties are NOT Tax Deductible

$250 per month ($3,000 annually), but only on full-time employees receiving tax subsidies.


If employer does offer a plan that is affordable to all FTEs

No Penalty

Definition of Affordable Plan Offered
For a plan to be affordable the employee's premium contribution to a single-only plan does not exceed 9.5% of W-2 wages.

Example - Affordable Plan Offered
The premium for a single-only plan costing $6,000 per year would be affordable to any employee making at least $63,158 annually ($6,000/9.5% = $63,158) even if employee pays 100% of premium.

 

 

Would You Like More Information About
Obamacare: The Affordable Care Act?

 “Look-Back” Defined August 31, 2012 - Part 2

The Affordable Care Act – Waiting Period Defined - Part 3

ACA 12-Month "Look-Back" Period Begins Jan. 1, 2013 - Part 4

 
Sources:
American Staffing Association, Legal and Government Affairs Department

ASA monitors and tracks hundreds of federal and state legislative developments and court and agency rulings every year.  ASA also conveys staffing industry messages to legislators, regulators, and court officials.
U.S. Department of Labor, U.S. Internal Revenue Service, Wikipedia

 

The information in the article above is intended for general education purposes only and should not be relied upon as a substitute for professional, legal, and/or accounting advice.

 www.JKentStaffing.com

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