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.

How's that exit strategy coming? Might want to pick up the pace

Apparently the Washington Post thinks that Obamacare will be a boon for temp agencies. The thinking is that, since the law requires employers to offer health insurance only if they have 50 or more full-time equivalent employees (full time is 30 hours a week under Obamacare; if you have 100 employees working 15 hours a week, that is 50 full-time equivalents, or FTEs, and you're on the hook), and employees hired through temp agencies don't technically count as employees of the company for which the work is actually performed, then companies will be encouraged to hire employees through temp agencies if that will keep them under the 50 FTE threshold.  Even for companies that have more than 50 FTEs working for them, hiring through temp agencies will enable companies to avoid having to buy insurance for those employees. Or, in the alternative, they won't have to pay the penalty (sorry, tax) on those employees should the company choose not to buy them health insurance.

The Post seems to think that temp agencies will be able to avoid paying for health insurance (or the penalties -- sorry, tax -- for not buying health insurance) for employees because of IRS regulations. Says the Post:

But in regulations issued last year, the IRS left an opening for employers of “variable-hour” labor such as temp agencies. If it’s not clear upon hiring that an employee will consistently work more than 30 hours weekly, companies get up to 12 months to determine whether the person is full time and qualifies for health benefits — even if the employee does end up working full time. Few temps last 12 months.

The Post is clearly delusional. Sure, Manpower, Kelly, Robert Half and God knows who else probably will benefit from that in most situations. They provide, mainly, temporary workers in non-professional, very temporary situations, often as little as a day or two. But the question as it relates to the temp-lawyer industry becomes not whether we will be around on a given project for more than 12 months -- usually, we won't -- but whether we can reasonably be expected to work at least 30 hours a week during the project. I don't think the agencies can reasonably claim that given the IRS regulations:

Determining Full-Time Employees for Purposes of Shared Responsibility for Employers
Regarding Health Coverage (§ 4980H)
Notice 2012-58
I. PURPOSE AND OVERVIEW
 This notice describes safe harbor methods that employers may use (but are not
required to use) to determine which employees are treated as full-time employees for
purposes of the shared employer responsibility provisions of § 4980H of the Internal
Revenue Code (Code). Specifically, the administrative guidance in this notice,
modifying and expanding on previous guidance, includes a safe harbor method that
employers may apply to specified newly-hired employees.
 As described more fully below, this notice –
• Expands the safe harbor method described in a previous notice to provide
employers the option to use a look-back measurement period of up to 12 months
to determine whether new variable hour employees or seasonal employees are
full-time employees, without being subject to a payment under § 4980H for this
period with respect to those employees. An employee is a variable hour
employee if, based on the facts and circumstances at the date the employee
begins providing services to the employer (the start date), it cannot be
determined that the employee is reasonably expected to work on average at
least 30 hours per week. (The 30 hours per week average reflects the statutory
definition of full-time employee in § 4980H(c)(4) and is the definition of “full-time
employee” as used in this notice.) Seasonal employee is defined in section
III.D.5, below. 

I added the bold and italic emphasis because I don't think that language gives temp agencies the ability to claim we aren't covered under Obamacare. While 40-hour projects are becoming the norm, let's face it: no one, right now, would even respond to a Posse List posting advertising a 29-hour project, no matter what the duration. The law firms always promise at least 40 hours a week. I don't see how temp agencies can take advantage of these regulations and claim the 12-month look-back period. They would have to credibly claim they weren't sure the work would be at least 30 hours a week. They can't claim that if the law firms are always promising at least 40 hours a week. One way or another -- whether firms will only promise 29 hours a week, or whether agencies will claim contract attorneys are suddenly independent contractors, give us 1099 forms and not pay for health insurance or the penalty -- things are going to change in this industry. I am inclined to doubt that the change will be for the better.