Affordable Care Act Updates and the Law’s Impact on Staffing

134091078It seems the only thing certain about the Affordable Care Act (ACA or Obamacare) is change. Since the New Year, there have been a number of updates to this complex law from the employers’ perspective, including:

  1. More delays for the employer mandate. The employer mandate was supposed to require employers with 50 or more full-time employees to provide coverage to those employees starting January 1, 2015. However, based on the “final” employer mandate regulations released in February, employers with 50-99 employees can delay compliance until 2016. To qualify for this delay, they must certify that they have not dropped their workforces below 100 full-time employees to put off compliance.
  2. Reporting requirements simplified. Minimum Essential Coverage (MEC, or Section 6055) and Applicable Large Employer (ALE, or Section 6056) reporting have been combined onto one form so self-insured employers don’t have to duplicate information. Information required of employers in Section 6056 has also been simplified.
  3. Relief for companies that DO have to provide insurance in 2015.Those with 100 or more employees will only need to provide healthcare insurance to 70 percent of their workforce in 2015.  In 2016, they will have to cover 95 percent of their employees as originally written in the proposed rules. Also, the penalty for not offering coverage will be $2,000 per employee minus the first 80 employees if even one employee gets a federal premium credit to purchase insurance through The Marketplace. Only 30 employees will be excluded from the calculation starting in 2016, as the proposed regulations had required.
  4. Non-compliant plans can continue to be renewed under a new extension.  Millions of Americans received cancellation notices from their insurance carriers last year because their plans did not meet the ACA’s minimum essential coverage requirements. President Obama announced in November that health insurance issuers could renew the non-compliant policies through 2014 under a transition relief policy.  That policy has now been extended through Oct. 1, 2016.

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Another change on the table would alter the definition of full-time employee. The House of Representatives passed a bill to change that definition to employees working 40 or more hours in a week. The law currently defines full-time employee as someone who works 30 or more hours in a week. The chances of this change passing the Democrat-controlled Senate or escaping the president’s veto, though, are fairly slim.

In the face of the change and uncertainty surrounding the ACA, employers, particularly staffing firms, are left to wonder what impact the ACA will have on employment. A recent report by the Congressional Budget Office (CBO) offers some predictions. It estimates that the ACA could lead to a decrease of 2.5 million jobs by 2024, mainly due to people leaving the workforce voluntarily because they no longer need full-time employment to get insurance. Instead, they can obtain it on the new Marketplace created by the ACA or through Medicaid, which has been expanded under the ACA.  The employer mandate will also contribute to this loss of jobs. Some companies near the 50-employee threshold are expected to reduce their workforces or decide not to hire to avoid the employer mandate. While statistics currently do not show this trend, the CBO noted that the employer mandate has not yet kicked in.

All along, it has been expected that staffing firms would benefit from the employer mandate as companies turn to contract staffing to avoid the employer mandate. Utilizing contractors allows companies to remain under the 50-employee threshold without sacrificing production. In this scenario, contractors become the legal employees of a staffing firm or a contract staffing back-office, which becomes responsible for ACA compliance, including providing required healthcare coverage to the contractors. This is expected to drive the already rapid growth of contract staffing.  In fact, some recruiters are already seeing contractors work longer assignments as they become part of a blended workforce model. In this model, the core of key, direct hire personnel is surrounded by an outer ring of contractors responsible for day-to-day tasks and critical projects, which can extend the length of their contracts.

Many recruiting and staffing firms are positioning themselves to take advantage of this trend by actively promoting their contract staffing services and learning all they can about the ACA so they can serve as a resource to their clients.  Larger staffing firms that are at or near the 50-employee threshold also have to determine how they will respond to the law. Some are considering outsourcing the employment of some or all of their contractors to a contract staffing back-office service so hey can stay below that threshold and hand ACA compliance and contractor benefits off to the back-office service.

The ultimate impact of the ACA is yet to be seen, and there will likely be more changes before we get to that point. But whether you are a “one-man show” or a large staffing firm, it is important that you stay up-to-date on all the latest developments and are prepared to help your clients cope with the regulations as they roll out and change.

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Debbie Fledderjohann
Debbie Fledderjohann is president of Top Echelon Contracting Inc., the recruiter’s back-office solution. Find her on LinkedIn.

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