Countdown to being an outlaw begins today

It's 2014, and the individual mandate under Obamacare requiring that I buy health insurance that meets the president's standards is now in effect. Oddly enough, I am unmoved. I feel no need to purchase abortion coverage, contraception coverage or port wine stain birthmark removal coverage. So I have not done so. Technically, I am not an outlaw until the end of March: if I haven't bought Obama-approved insurance by then, the IRS will impose a tax on my non-activity (which is kind of weird when you think about it). Of course, they can only collect the tax by seizing my tax refund, and I will make sure I owe the feds about $100 -- no refund, no tax. Suck it, IRS.

Boy, that's good news, too

Temps at the agency I am working for recently received an email letting us know that Obamacare was about to ruin our lives. The email is as follows, with names deleted to protect the guilty and emphasis added to clarify the inanity of this particular notice:

Good Afternoon,
This information is part of the Affordable Care Act and all employers are required to distribute this notice.
Although [the agency I am working for] does not currently offer medical benefits to our staffed professionals, we are required by Federal law to send the attached notice to all employees, both part-time and full-time.
The attached Notice must be made available to you in the case that you decide to enroll for coverage in the Marketplace/Exchange, effective January 1, 2014. This notice confirms that the health coverage offered by [the agency I am working for] meets (and exceeds) the minimum standards that are outlined by the Federal government. 
Please keep a copy of this notice for your records, and reach out to me with any questions.

So, enlighten me: my agency doesn't offer health care coverage to me, but the health care coverage they offer (to someone else?)  "meets (and exceeds) the minimum standards that are outlined by the Federal government." What does that mean? I think it means that the agency gives its full-time employees coverage that meets federal standards, but that temps can go suck dick. I could be wrong, but I don't think so. Certainly it fits with the general pattern in this industry of treating temps like trash that hasn't been taken out yet.

The question I have, though, goes more to government than to agency stupidity: why require companies that don't offer health insurance to tell employees to whom they do not offer health insurance that the health insurance they are not being offered meets (and exceeds!) federal standards. I guess that's about standard government-level thinking.

I think I know how temp agencies will survive Obamacare, and you won't like it

We have discussed repeatedly at this site whether the mandates imposed by Obamacare on firms that employ more than 50 full-time employees are going to fuck temp agencies and, by extension, temps, such as here and here and here. The thinking at the time was that temp agencies would have to either have to limit temps to 29 hours a week -- not a viable option, really -- or turn us into Form 1099 independent contractors -- a pain in the ass for temps and a legally dubious move on the part of temp agencies, given the IRS rules on 1099 contractors. Turns out there is a cheaper, viable solution that I think temp agencies will employ. Problem, of course, is it sucks for temps. But then, Obamacare sucks all around, so why should this be different. Let's face it, life in Temp Town sucks, so why should this be any different?

In any event, I believe my fears regarding the demise of the temp industry were misplaced. There is, within this clusterfuck of a law, a way for employers to offer their employees a cheap, qualifying plan that allows them to avoid the penalties they might otherwise incur for not offering their employees suitable health insurance. It is, of course, a plan that no one would actually want in a free-market kind of atmosphere, but let's not get carried away here. We now live in the world of government-mandated health insurance, so it should come as no surprise to learn that the temp employer's saviour is neither insurance nor likely to foster good health.

Behold, I give you the "skinny plan."  Trust me, this is not insurance you would buy in the real world:

ObamaCare's individual mandate is supposed to nudge healthy workers to buy comprehensive coverage, either out of a sense of propriety or thrift — not wanting to throw away money to pay a tax penalty.

But a new, low-priced health plan developed by insurers to cover run-of-the-mill medical costs — but not hospitalization or surgery — would let workers dodge the penalty and leave them with a clear conscience.

What most young, single people want in the way of health insurance is catastrophic coverage: low-cost, high-deductible insurance that leaves routine health care costs to the insured -- doctor visits, routine prescription costs that fall below the deductible amount -- while covering big costs, like hospitalization or major injuries that send the insured to the emergency room. For most people, this makes sense. It's like owning a car: you don't want your insurance to cover your oil changes and tire rotations, but you sure as hell want your insurance to pony up for accident damage.

Well, these skinny plans do the opposite. They're like buying auto insurance that covers inspection costs, oil changes and tire rotations, but is nowhere to be found when an accident happens. All the plans do is "help defray the cost of up to six visits to the doctor, x-rays, generic drugs and preventative care, the Wall Street Journal reported." This is, to use a term of art, fucking worthless as health insurance goes. But Obamacare has essentially outlawed buying the kind of catastrophic insurance that everybody except old people want, so this is probably what Temp Town is going to get.

In any event, these skinny plans are likely to cost only about $50 per month, so temp agencies probably will go with this. It makes sense for them, even if the coverage is worthless to temps. Seriously, if you don't get hurt or really sick, do you spend $600 a year on routine health care, like normal doctor visits and prescriptions? Most people don't. And this is just individual coverage, people. Your family is fucked. If you are healthy, it makes more sense to eat the penalty for not buying insurance -- it's only $95 or 1% of income in 2014, $325 or 2% of income in 2015, and $695 or 2.5% of wages in 2016 and thereafter. Of course, the IRS can only collect the penalty by withholding your tax refund, so, if you do your withholding so you have no refund, then you pay no penalty.

In the end, the skinny plans are not like insurance at all. They're like a pre-paid maintenance plan. Insurance is designed to cover extraordinary costs from unusual events, like when you get hit by a bus and have lots of hospital expenses. The skinny plans don't cover that, but they'll pay for lots of doctor visits. Let's face it, most people don't go to the doctor every other month. So who the fuck wants to pay for coverage that only covers that crap? Stupid.

On the up side, skinny coverage gives temp agencies a way to stay in business. So smile -- you get to keep clicking. Which, I guess, is kind of like telling galley slaves they can keep pulling that oar. Sorry, kids, that's the best I've got.

Lots of change, but I don't see much hope

 We've been discussing what Obamacare is going to do to the temporary attorney industry. I'm here to tell you, I don't see how it could possibly be good. Temp agencies historically have offered few benefits, in large part because their margins -- particularly in recent years -- are so thin.  Every agency I am familiar with has been cutting back on paid holidays, paid time off, hours-based bonuses and the like to the point where those sorts of extras are simply a fond memory. There is no reason to think the temp agencies will be willing to pay for health insurance that meets Obamacare standards -- which is, by the way, much more expensive than the less-generous health insurance that the agencies have previously not offered.  While some agencies contribute toward a minimalist health insurance policy while you're working for them, it is a benefit they don't make widely known and it is, of course, contingent upon you actually working for that agency. Not exactly something you can count on. And if they don't want to pay for insurance, rest assured agencies won't want to pay the penalties for not offering insurance, either.

So what can they do? Previous posts have established that the temp agencies  have only one option that totally avoids the costs of either penalties or offering insurance policies, and that is to turn temps into independent contractors and give us all 1099 forms instead of W2s. The problem is, that probably won't work.

A review of IRS rules on what distinguishes an independent contractor from an employee is not encouraging, at least if you are a temp employment agency hoping to avoid paying for health care (or the penalties for not doing so). From the IRS, these are among the determining factors as to whether you are an employee or an independent contractor:

The courts have considered many facts in deciding
whether a worker is an independent contractor or an employee. These relevant facts fall into three main categories:
behavioral control; financial control; and relationship of
the parties. In each case, it is very important to consider
all the facts – no single fact provides the answer. Carefully
review the following definitions.

Behavioral Control
These facts show whether there is a right to direct or
control how the worker does the work. A worker is an
employee when the business has the right to direct and
control the worker. The business does not have to actually
direct or control the way the work is done – as long as the
employer has the right to direct and control the work. For
example:
Instructions – if you receive extensive instructions
on how work is to be done, this suggests that you are
an employee. Instructions can cover a wide range of
topics, for example:
• how, when, or where to do the work
• what tools or equipment to use
• what assistants to hire to help with the work
• where to purchase supplies and services
If you receive less extensive instructions about what
should be done, but not how it should be done, you
may be an independent contractor. For instance,
instructions about time and place may be less important
than directions on how the work is performed.
Training – if the business provides you with training
about required procedures and methods, this indicates
that the business wants the work done in a certain way,
and this suggests that you may be an employee.

Financial Control
These facts show whether there is a right to direct or
control the business part of the work. For example:
Significant Investment – if you have a significant
investment in your work, you may be an independent
contractor. While there is no precise dollar test, the
investment must have substance. However, a significant investment is not necessary to be an independent
contractor.
Expenses – if you are not reimbursed for some or all
business expenses, then you may be an independent
contractor, especially if your unreimbursed business
expenses are high.
Opportunity for Profit or Loss – if you can
realize a profit or incur a loss, this suggests that you
are in business for yourself and that you may be an
independent contractor.

Relationship of the Parties
These are facts that illustrate how the business and the
worker perceive their relationship. For example:
Employee Benefits – if you receive benefits, such as
insurance, pension, or paid leave, this is an indication that
you may be an employee. If you do not receive benefits,
however, you could be either an employee or an independent contractor.
Written Contracts – a written contract may show what
both you and the business intend. This may be very
significant if it is difficult, if not impossible, to determine
status based on other facts.

Seriously, it looks to me like behavioral control alone sinks any effort to make temps 1099 contractors. The agencies and firms control everything we do. One of the overriding themes of temp work is that the firms don't trust us to make decisions on our own. I don't see how anyone can claim that we are "independent" under those circumstances. Frankly, this looks like a loser for agencies, as well.

I don't know what this means for our industry. I don't know if there is a way out for the agencies. I do know that their margins are too thin to simply absorb the costs of either policies or penalties.There is a very real possibility that the firms will start to skip the agencies altogether and go with direct hire -- a path a number of firms already are taking -- but make the temps 1099 contractors. They probably can pull that off more easily than the temp agencies can. That will make your taxes more complicated, but it also will dramatically increase the number of parties a temp needs to engage with in order to secure employment. You'll have to go to every firm around to find out who's hiring. Right now, the agencies to that for us. That could easily change.

The short answer here is, I don't know what's going to happen, and neither do you. But things are going to change. They are going to change a lot, and I don't think they are going to change in a way that is good for temps. At a minimum, I believe it will require a lot more effort on our part to secure employment. The irony remains, most temps voted for this. Well, elections have consequences. I believe these consequences are going to hit pretty close to home for Temp Town.

Obamacare possibilities?

Following my post the other day, Time to realize what you voted for, some folks I know started discussing the possibilities. One theory advanced was that temp employers would not fuck the temps, but would instead fuck their permanent employees. It would work like this: rather than cut everyones' hours, or turn temps into 1099 contractors (a possibility that is subject to legal hurdles, which I will discuss later), temp agencies would offer all of their full-time employees health insurance, but would pay for little or none of the cost. In other words, the agency would get its temps the group rate the agency has access to, but would contribute nothing to the cost.

My familiarity with the tax and Obamacare implications of this strategy is limited. I haven't heard anyone in industry advance this proposal, which leads me to believe that they have lawyers who have told them it wouldn't work. But I don't know. I do know that the current system is rooted in World War II, when the federal government (probably unconstitutionally, but that is an argument for another day) froze wages. To allow businesses to attract employees, the feds created a system where employers could offer benefits in lieu of wage increases. In exchange for tax benefits, employers could give employees better pensions or health insurance instead of wage increases. This, of course, laid the groundwork for the unions negotiating the auto companies into ruin. The auto makers failed to realize the market might change, and so gave the unions contracts that included benefits that made the industry unsustainable. But that is a discussion for another day. And please, don't argue that GM and Chrysler aren't still circling the drain. It is unbecoming. But I digress.

In any event, I have no idea whether a fuck-everyone approach would work for the agencies. I suspect that they would garner no tax benefits if they paid nothing for their employees' health insurance, but I don't know if they could do that and escape Obamacare penalties or mandates. Any tax lawyers (or newly spawned healthcare lawyers) out there know the answer?