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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