How companies are developing strategies to meet the PPACA mandate

Daniel Meracle, Employee Benefits Consultant and Wellness Adviser, Benefitdecisions, Inc.

Daniel Meracle, Partner, Benefitdecisions, Inc.

Businesses with many variable-hour and part-time employees are developing new strategies to address the employer mandate in the Patient Protection and Affordable Care Act (PPACA).

Although implementation of the mandate has been delayed until 2015, companies continue to work on ways to avoid penalties when enforcement kicks in, says Daniel Meracle, a partner at Benefitdecisions, Inc.

“We’re seeing four variable-hour strategies that employers are using,” Meracle says. “Some may be against the spirit of what Congress intended when they passed PPACA, but they are within the guidelines of the law.”

Smart Business spoke with Meracle about these latest strategies for meeting PPACA requirements for variable-hour employees.

What are businesses with variable-hour employees doing to meet the PPACA mandates?

First, employers need to measure whether employees worked 30 hours a week or more, and would be considered full time for the purposes of mandatory health care benefits. The PPACA gives the ability to look back 12 months to determine if an employee has worked an average of 30 hours a week. If he or she did, the employer would be required to provide health insurance that has a minimum value and is affordable.

In the hospitality industry — restaurants and hotels — businesses historically have turnover rates of 90 percent or more within 12 months. Most employees will leave during the 12-month look back period, so employers will not have to offer health care insurance to them.

Basically, it’s a matter of tracking the hours, and several technology programs are available to manage that task. Certainly payroll companies can provide that service, as well.
Three other strategies being utilized are:

  • Reducing hours below 30.
  • Slash and share.
  • Providing minimum essential coverage plans.

What is slash and share?

Businesses are sharing employees. A restaurant owner cuts an employee’s hours below 30 and then might share that employee with another franchise owner, who also might employ that person for less than 30 hours.

They have to be two different franchise owners; it can’t be two restaurants owned by the same person or company. It could be that one is Hardee’s and one is Jack in the Box, and the person works for 20 hours a week at each.

How does the minimum essential coverage strategy work?

Insurance companies have realized that under the strict guidelines of the PPACA minimum essential coverage is nothing more than preventive care. So businesses are offering what are nicknamed ‘skinny’ plans to employees. Making these plans available allows the business to avoid the $2,000 penalty per employee for not providing coverage.

Skinny plans cost about $40 to $50 a month, and all of that cost could be paid by the employee. If an employee declines the coverage, he or she would be subject to the $95 penalty under the individual mandate. But a young, healthy person would rather pay $95 than buy health insurance because there are no restrictions regarding pre-existing conditions. When you can join the exchange at any time, why not wait until you are sick to get coverage?

Most of these minimum essential coverage plans also are self-funded, which gets around a lot of PPACA regulations.

However, there are two caveats to taking this approach — these plans are probably not within the spirit of the law, so this option could go away with the issuance of a release from the Internal Revenue Service or Department of Health and Human Services. Also, employees can still go to the health care exchanges and get a subsidy because the plan does not provide minimum value.

If an employee gets a subsidy, the employer would pay a $3,000 penalty for that person. Still, it allows you to avoid paying $2,000 on all employees.
Of course, implementation of all of these strategies might be delayed because the employer mandate has been pushed back until 2015. But these are ways businesses are dealing with their variable-hour employees right now.

Daniel Meracle is a Partner at Benefitdecisions, Inc. Reach him at (312) 376-0433 or [email protected]

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