By Janet Adamy
The Wall Street Journal, July 13, 2011
It is three years before most of the new health-care law kicks in, but already some of America’s largest employers are peppering the Internal Revenue Service with concerns that making the changes will be far more complex than they anticipated.
At issue is one of the law’s central requirements: employers with 50 or more full-time workers must offer affordable insurance or pay a penalty. It sounds simple enough. But in crafting the rules, the IRS and two other federal agencies are now tackling basic yet messy questions, such as who counts as a full-time worker and how do companies measure whether insurance is “affordable.”
Retailers, restaurants and other companies that rely on seasonal, temporary and other workers with flexible schedules, say it’s hard to figure out who is a full-time worker. That could cause the employer to enroll and drop them from coverage, potentially churning them through new state-run insurance exchanges or the Medicaid federal-state program for the poor, as their hours fluctuated.
Census Bureau data shows that six million, or 5.6% of private-sector employees, work variable hours.
The debate centers on how federal agencies define a full-time worker. The law itself, signed by President Barack Obama in March 2010, defines a full-time employee as one who works at least 30 hours per week on average in a given month.
Once classified as a full-time worker, the employer is obligated to provide affordable health care or pay a penalty of $2,000 per worker, excluding the first 30 workers.
In response, the IRS in May floated the idea of giving employers a “look-back” period of between three and 12 months to determine whether certain workers met the full-time definition. Only then, if the employee hit the target, would the employer have to start providing insurance or pay the penalty.
Meanwhile, employers cheered the idea and are pressing the IRS to go further. An umbrella group called Employers for Flexibility in Health Care, which represents at least four dozen big employers and trade groups, last month asked the IRS to ensure that all part-time, temporary and seasonal hires wait up to 12 months, plus an additional 90-day waiting period, before they qualify for insurance.
In one of more than 200 submissions made recently to the IRS, Wal-Mart Stores Inc., Gap Inc., United Parcel Service Inc., Hilton Worldwide Inc. and others have pushed for a lengthy grace period that could stave off penalties for a year or more after certain workers are hired. The result could undermine some of the law’s intent to insure those who can’t afford coverage.
http://online.wsj.com/article/SB10001424052702304584404576440093426726656.html
And…
Letter
June 17, 2011
From: Employers for Flexibility in Health Care
To: Internal Revenue Service
RE: Request for Comments on Shared Responsibility for Employers Regarding Health Coverage (IRC §4980H, as created by PPACA §1513)
(excerpt)
A. Definition of Full-time Employee Under the “Look-back” Methodology
1. Employers should be granted flexibility to utilize the lookback period for new parttime, temporary, and seasonal hires. Of primary importance to employers with variable workforces is the treatment of new and newly eligible employees, as our workforce fluctuates on an ongoing basis throughout a given year with new employees entering our systems sometimes on a daily basis. Notice 2011-36 indicates that the Department is considering applying the proposed safe harbor “only in a limited form” for such employees. A limited application for newly hired employees would be extremely problematic for employers with variable workforces. Employers with variable workforces must be able to utilize the look-back period primarily in the first year of an employee’s service to determine whether the employee has worked sufficient hours to reach full-time status and become eligible for the employer’s health plan. In many cases in our industries, employees may choose to leave before completing one year of service. In addition, under the individual mandate in 2014, these employees may be receiving coverage through other sources (e.g., Exchange, Medicaid, dependent or parent coverage). Because these employees may be in the middle of a plan year for other coverage and do not want to lose their annual benefits (i.e., restart their annual deductible or out of pocket maximum), they may choose to retain that coverage rather than enroll in the employer plan in the first year of service.
Employers should have the flexibility to choose the length of the look-back period ranging from 3 to 12 months depending on the nature of their business and their workforce.
For employers offering health plans, the 90-day wait period would begin once an employee’s eligibility for the employer plan is established.
Utilizing this form of a lookback not only allows for a longer measuring period, but also a longer stability period to reduce churn between employer and Exchange coverage. Not applying the look-back period to new parttime, temporary and seasonal employees would be a strong deterrent to employers’ giving employees the opportunity to work more than 30 hours per week on average and employing seasonal workers beyond 90 days.
C. Maintaining the Employment Connection During the Stability Period
The Notice states that if an employee is determined to be full time during the lookback period, then the employee would be treated as a full-time employee during a subsequent stability period, regardless of the number of the employee’s hours of service during the stability period, so long as he or she “remained an employee.”
The Coalition recommends that employees maintain a connection with an employer and meet a minimum work threshold during the stability period. This is particularly important for employers with large numbers of parttime, temporary, or seasonal workers whose hours and patterns of work fluctuate considerably.
D. Penalties
1) Penalties should not apply during any lookback or wait periods.
2) Seasonal employees should not be included in the total number of fulltime employee for purposes of calculating employer tax liability.
For full 10 page letter, including signers, click on this link:
http://www.restaurant.org/pdfs/advocacy/20110617_EFHC-Re_Notice2011-36-FINAL.pdf
Comment:
By Don McCanne, MD
When supposedly the intent of the health reform legislation was to try to provide health insurance for everyone (well, not quite), it is particularly disconcerting to see large employers such as Walmart, Gap, United Parcel Service, Hilton, and even health insurer Aetna propose rules that would relieve them of the requirement to cover as many as half or even more of their employees. But these employers do have a point. Is it reasonable for them to provide health benefits for a highly unstable workforce that works seasonally, part time, or temporarily, especially when that turnover creates instability and fragmentation in the employees’ health care coverage?
Although Walmart has been a favorite whipping boy for the health justice community, should Walmart alone really bear that much of the blame? As long as we have a system that is dependent on a patchwork of private health plans, public programs, and no programs at all, no matter how much Walmart tries, their employees cannot possibly be assured of having stable, comprehensive coverage throughout their pre-Medicare years.
We should dismiss Walmart (and all other employers) as the keeper of health insurance (while encouraging them to apply the savings toward living wages). But to do that, we need to end our fragmentation of coverage and care by establishing a single, comprehensive health program that will include everyone – from birth, throughout life – through an improved Medicare for all.
I mean… look back over a year of employment? … and then start another three month waiting period before eligibility is established? … and then find that this “associate” is no longer employed? (Check… more bucks for the Walton family.) Come on!