ACA: Who Should Pay?

482047285We are finally getting to the point where managed service programs (MSPs) are analyzing survey responses from their staffing suppliers about how they plan to comply with the Affordable Care Act (ACA) and making recommendations to their end client buyers.

Contingent staffing suppliers who offer plans that meet Minimum Essential Coverage and Minimum Value will be required to pay 50 percent of the plan cost for any of their full-time employees who choose their employer’s plan. We estimate this will cost us, as the employer, an additional $170-200 per month for each employee who enrolls.

The big question remains: Who should be responsible for picking up tab for this added burden to employers? Should it be solely on the contingent staffing companies or should it be the end clients where the Staffing company employees’ work or should it be a shared responsibility?

Our position as a supplier is, if a MSP is in place, then it should be a shared responsibility with the end client buyers reimbursing their suppliers for the hard costs of complying with the ACA and the suppliers absorbing the soft costs to administer it. We believe it is in all parties’ best interests to do so in order to maintain quality service and avoid substantial risk.

Quality of Service. Buyers and MSPs have negotiated with their suppliers to put pricing in place to provide cost savings for their end clients. Suppliers to MSPs have significantly lower gross margins at those programs compared to their non-MSP accounts. There is simply no room for the temporary employers to absorb an additional $175-200 monthly cost and still provide quality service.

There is also the question of fairness and how to best build a partnership with the supply chain. Pricing, in most cases, was agreed upon prior to ACA. Many supplier agreements contain a clause allowing for increases in pricing to allow for statutory increases and the cost of complying with ACA is essentially a statutory increase. If suppliers are not compensated for the additional costs, it is likely they will not continue to support those programs and prioritize those that do treat them fairly.

PREMIUM CONTENT: US Affordable Care Act Requirements – What Staffing Firms Should Know

Risk Mitigation. Mature MSPs provide excellent risk mitigation advice and assure supplier compliance to their buyer’s programs. Many are urging their end client buyers to pick up the tab for the additional costs that their suppliers will incur to comply with ACA. They have considered the situation and realize that it falls under the High Risk/High Probability quadrant of a risk assessment matrix. The penalties for non-compliance are potentially very expensive for employers who do not properly administer it. Large MSP providers have thousands of suppliers and have concerns that every supplier will follow and document the complex ACA enrollment/declination/reporting requirements correctly.

The question about who is/are the employer(s) needs to be considered. Legally, the end client buyer might be seen as a Joint Employer and be held responsible if there are issues with any of their Staffing supplier’s compliance.

Please view minutes 25:40 to 26:40 of this YouTube video.  It is part of an ADP presentation entitled, “ACA Best Practices: Why a ‘Wait and See’ Attitude Can Hurt You,” and specifically addresses what buyers must do so that temporary/contingent employees are not counted as the buyer’s employees for ACA purposes. This presentation is clear in its interpretation of ACA that end client buyers must follow 2 steps to protect themselves:

  1. Have a contract in place that clearly states the staffing company is the employer and is responsible for all compliance items related to ACA;
  2. AND that the staffing agency must charge the buyer for the cost differential to reflect the cost of providing healthcare to those full time ACA people, and if not charged then the buyer must include the employees as the buyer’s employees for ACA purposes.

If it is determined that the best practice is to have the end client buyer reimburse the hard costs to comply, then what is the best method to bill for it? MSP surveys have asked about mark-up increases, adding to the hourly bill rate and monthly invoices. We believe there are too many variables to get an accurate and fair reimbursement if mark-up or hourly rate methods are used. We suggest that suppliers send monthly invoices (or enter it in the VMS application as a pass through cost) that reflect the actual premium amount.

MORE: ACA: Capped hours risk in a no-health-plan firm



Don Dewar

Don Dewar
Don Dewar is vice president, national sales, at inSync Staffing. He can be reached at don.dewar (at) insyncstaffing (dot) com.

Don Dewar

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3 Responses to “ACA: Who Should Pay?”

  1. DenayHawn says:

    It wont really matter if someone is a lower skilled or a high-end worker…the employee and whether they are eligible for benefits through the ACA and agency’s plan will be based on their total hours worked through the agency and not the one specific assignment they are on…So therefore, all agency clients will be required to pay the additional costs whether or not that employee is on a short term temp or a long time temp  assignment – it is all based on their total hours and their average hours worked over the course of the entire year’s history with the staffing agency….. So to be fair to all, it must be absorbed by all clients because you never know which employee will be assigned where or for how  long……Does that make sense?  

    The hardest part is trying to explain this charge  to a client who calls in a 1 day assignment for someone….Or the client who has worked with the agency on short term temp assignments at the same bill rate for a year or more. …..They may be assigned an employee who does receive ACA benefits or one who does not, but it is impossible to track all of that when you are assigning someone to a job – so it just has to be a cost that absorbed by all clients and the agency regardlessof the type of employee ot the length of their assignment.

  2. jhumrichouse says:

    The concept of who “should” pay for the ACA doesn’t really come into play in my judgment.

    As a country we essentially voted ourselves a new benefit.  The market price for our services – i.e., our wages – will therefore adjust accordingly as that additional cost is absorbed.  If there were no other mitigating factors, wages would come slightly down and the value of benefits would go slightly up for the minority of workers who actually received something of value due to the ACA (a majority of workers are likely already covered and thus received little to no benefit).

    However, there are mitigating factors – primarily strong GDP growth coupled with low unemployment.  The upward pressure this places on wages may end up overriding the downward pressure caused by the ACA.  In addition, various buyers of staffing services necessarily buy different things.  Some buy higher end, more professional services where workers are typically already covered.  Others buy primarily lower end, less professional or non-professional services where a significant number of workers may not be covered.  Full time vs. part time introduces additional complexity.  4-5 million potential new work permits to formerly illegal/undocumented workers also affects the equation.

    Net net, each staffing buyer will absorb the portion of the ACA it feels it must in order to mitigate the business risk of higher-than-acceptable contractor attrition.  No more and no less.  However the concept of “should” will almost never enter the discussion.

    The range of likely cost absorption by staffing buyers is therefore quite possibly everything from 0% to 100%.  Market averages may provide useful shorthand for discussion, but are unlikely to have real-world applicability for individual staffing firms or their contract workers as each client’s decision will reflect their individual situation.

  3. BrianHoffmeyer says:

    Good post Don, very informative! Question for you (and the other 53 people “listening”), does your opinion change for short term assignments – e.g. day workers in a light industrial environment or even professional workers on a two week gig or would it just be that the pass through cost would be pro-rated?

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