Friday, November 16, 2012

Yeah, that won't work

A friend of mine gave me an answer on the questions posed in Obamacare possibilities. Basically, employers won't be able to shuffle off the costs. If they "offer" health insurance but pay a minimal amount of the cost, they remain subject to the penalties. As my friend put it:

No, that would not work.  An employer who offered insurance but who did not pay any of the premiums would still be subject to PPACA (Obamacare) penalties an employer offering an "unaffordable" plan.

Under the PPACA penalties will be imposed when an employer either does not offer health coverage or provides “unaffordable” coverage and at least one full-time employee obtains a government “subsidy” through a health insurance exchange. If an employer chooses to provide health benefits, there may still be a penalty if the coverage offered is “unaffordable.”  Coverage qualifies as unaffordable if (1) premium costs are higher than 9.5% of an employee’s household income or (2) the employer contributes less than 60% of the actuarial plan value.  The penalty is either $3,000 per subsidized employee or $2,000 times the number of all full-time employees (excluding the first 30), whichever amount is smaller.  
So if an agency provided coverage as described in your post, i.e., with the employee paying 100% of the premiums they would in no way be limiting their potential penalty liability under the PPACA.
This matched up with my research, which led me to this excellent  site. Unfortunately, the first possibility I suggested in Time to realize what you voted for -- that agencies would simply cut temps off at 29 hours per week -- won't work. Obamacare factors in full-time equivalents -- FTEs -- and so "part-time" employees can add up to full-time employees. As these guys explain, that still would put an employer such as a temp agency over the penalty threshhold pretty quickly:

To determine if your business qualifies as a “large employer” calculate the full-time equivalent of your part-time employees using the following formula:
(Number of Part-time Employees X Average Number of Hours)/120 = Full-time EquivalentThis calculation is done on a monthly basis. As an example, if you have 30 part time employees working an average of 15 hours per week:
(30 part-time employees x 60 hours)/120 = 15 full-time employees 
That means that cutting employee hours will reduce an employer's costs if the employer opts for the penalty, but it will by no means eliminate those added costs. The margins for temp agencies these days are too thin for them to pay for insurance or the penalties. Using the FTE formula, most of the agencies that actually have work for temp attorneys will be required to do one or the other -- pay for the insurance, or pay the penalty. In the absence of changes to the law -- don't hold your breath -- I think temp attorneys can look forward to becoming 1099 employees.

The question this raises, of course, is: can the agencies make that stick? I'm still researching independent contractor requirements under the Internal Revenue Code. Anybody with knowledge, feel free to chime in. Otherwise, I'll be back with more. Stay tuned.

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