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June 11, 2015

ACA Responsibilities for Smaller Employers

Dear Jon,

We have 80 full-time employees and offer a health benefit plan to only about 15 of our people (primarily management).  We understand that in 2016 we must offer a health plan to the rest of our employees, but how do we identify the individuals to whom we should offer or are required to offer coverage?

Looming Employer Mandate Inquiry in Newman

 

Dear LEMIN,

In 2015, the Patient Protection and Affordable Care Act’s large employer mandate went into effect.  Initially, thanks to some transition relief, the mandate only applies to large employers with 100 or more full-time employees (including full-time equivalents).  In 2016, the mandate will apply to employers with 50 or more full-time employees (including full-time equivalents), but right now employers that fall into that 50–99 range have an extra year before the mandate kicks in.

The mandate requires that a large employer offer minimum essential coverage that meets minimum value and is affordable to substantially all full-time employees and dependents at least once per year or face potential tax penalties (if and when a full-time employee received subsidized coverage at either a state or federal health insurance exchange).  Importantly, an employer need only offer coverage to full-time employees.

There are two primary methods an employer can use to identify full-time employees

  • The monthly measurement method
  • The look-back rules

Under the monthly measurement method, full-time employees are those who are working 30 hours a week or 130 hours month.  These individuals must be offered coverage after a waiting period of no longer than 90 days.  Under the look-back rules, full-time employees are defined the same way.  Individuals who are working 30 hours a week or 130 hours a month must be offered coverage after a maximum 90-day waiting period.  However, the look-back rules provide additional flexibility for employers that employ seasonal, variable or part-time employees.  An employer may use measurement periods (as long as 12 months) to identify whether its seasonal, variable, and part-time employees are working full-time over the course of that measurement period.

It’s time for you to make a decision:  will you use the monthly measurement method or the look-back rules.  If your employees skew towards seasonal, variable, or part-time using the look-back rules will likely prevent these individuals from participating as they will not qualify under a longer measurement period.  You will not be required to make an offer to these individuals if they don’t qualify as full-time.  Obviously, this could be a dramatic cost-savings for you. Please note however, that failing to offer coverage may put you at a competitive disadvantage when seeking labor.

If you were to use the monthly measurement method, employees working 30 hours a week or 130 hours a month must be offered coverage after no longer than a 90-day waiting period.  Individuals who may not qualify for coverage under the look-back rules will qualify under the monthly measurement method.  Employers with a seasonal workforce, employees who work less than six to seven months customarily during the same part of the year, can drastically reduce their health benefit plans costs and employer mandate liabilities by using the look-back rules.

If you are interested in learning more about the look-back rules and how they work, I recommend downloading the Ag Employer’s Guide to Health Care Reform available to all WGA members through our store.  You can find it here:  www.bitly.com/aghcrguide.  For more information about this article or if you have other questions about health care reform, contact our Health Care Reform team today at [email protected] or 800-333-4WGA. Write to Dear Jon at [email protected]. For more information and resources on Health Care Reform, visit www.wgat.com/health-care-reform.