Roll-out of the Affordable Care Act (ACA) has moved to the next stage. In 2014, the individual mandate in which all individuals were required to sign up for health insurance took effect. As the calendar changes and we enter 2015, employers must begin implementing the tenets of the Affordable Care Act. Staffing agencies, employing workers to place on assignment with their clients for short periods of time, are also required to provide health insurance for those workers. In fact, the ACA requires that all staffing companies, employing 100 or more employees, offer affordable and ACA qualified insurance to 70% of its eligible employees or pay significant fines and penalties. What specifically are the responsibilities of a staffing agency in determining whether they must offer coverage?
Eligibility for Employer Sponsored Coverage:
Any temporary or contract worker of a “large” staffing agency, who has been on assignment through their staffing agency for at least 1,560 hours during 2014 will become eligible for coverage as of January 1st, 2015.
Going forward, the ACA requires all staffing agencies (and other employers) to categorize all new hires as one of the following:
Do not erroneously assume that all hires made by staffing agencies would be Variable Hour employees. The IRS has enacted stringent rules staffing companies must follow in order to justify that status. When an employee is classified as “Variable Hour”, the employer can elect to have the individual on the payroll for a defined “measurement period” (typically 12 months) before the healthcare benefit must be offered. This is a significant cost savings for most staffing companies and their clients, and the IRS has indicated its intent to monitor potential abuses.
Employer may determine the status of an employee as a full-time employee during a future period (referred to as the stability period), based upon the hours of service of the employee in a prior period (referred to as the measurement period). The measurement period lasts 3 to 12 months.
As per the ACA, employers must gear up for the following:
By January 2015: All staffing companies employing 100 or more employees must offer affordable an ACA-qualified insurance to 70% of its eligible employees or pay significant fines and penalties.
By January 2016: Companies with 50+ FTEs must offer affordable healthcare to 95% of their full time employees.
Who is impacted by the ACA?
26 states across America have refused to shoulder the burden of operating the health coverage exchanges and have sued the government for exceeding its authority in enacting the massive and unaffordable expansion of Medicaid and coercing people to buy health coverage. Companies and individuals who are located in the other states will be impacted by the mandates of the ACA as below:
How much Coverage is to be offered?
The question to ask now is – how well are you prepared?
Each client requirement for a temporary resource should state the anticipated start date, end date and number of hours to be worked each week. With that information, the staffing agency should be able to anticipate which category the individual would fall into. Given the 90 day period before the worker must enrol, agencies can eliminate the “day workers” and short-term workers. Agencies must stay on top of the number of hours worked, particularly when a worker is placed more than once during the year by an agency. In particular, careful records must be kept to track hours of workers placed on numerous assignments by the same agency over the course of the year.
There are two categories of costs associated with the ACA that employers everywhere are facing:
Direct costs of ACA will vary dramatically by staffing agency, depending on several factors:
Initial research estimates that most staffing agencies will experience an average increase in direct costs of 5 -8% for permanent employees, and a 3-5% increase in direct costs for temporary employees.
Research conducted on behalf of the American Staffing Association (ASA) reveals that 91% of the staffing firms polled are planning to pass their ACA costs back to their clients in the form of across the board increases in bill rates. Thirty-eight percent are planning 3-5% increases, but another nine percent are thinking more in terms of 16% or more. Additionally, nineteen percent are still not yet sure how much they will increase bill rates. At the same time, clients have begun to incorporate language into requests for proposals that specify that the staffing agencies will assume these incremental costs. Time will tell whether the estimated cost increases are accurate, and who will ultimately fund healthcare insurance for contingent workers. We’ll keep you updated over the course of the next year.
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