Update: The Impact Of Healthcare Reform On Staffing Companies
June 28, 2012 will go down in history as the day the Supreme Court of the United States ruled that the Affordable Care Act, passed by Congress in March of 2010, is constitutional. It doesn’t matter which side you support. It doesn’t matter if you agree with the decision or the rationale behind it. Many parts of healthcare reform have already taken effect, and most experts agree that the core concepts of this legislation will be fully enacted, in one form or another, in 2014.
Right now, most staffing companies offer health insurance to their own full-time employees, not temporary and contract workers. In 2014, staffing companies will be required to offer minimum essential coverage to all employees, including eligible full-time temps and contract workers. It is expected that those who work 130 hours per month for three months will become eligible.
However, minimum essential coverage details and eligibility requirements have yet to be finalized. Companies that do not to supply a healthcare plan will be forced to pay an excise tax of approximately $2000 per employee per year.
Because many temps and contract workers are hired for short-term or seasonal positions, turnover is high. Less than 20% stay in the same position for more than six months. These facts raise obvious concerns, from tracking employee eligibility, to compliance and regulatory nightmares, to concerns about cost.
Some staffing firms are still hoping for the repeal of healthcare reform. Others think it makes sense to pay a fine instead of offering coverage. The reality is that neither the fine nor the contribution to the premium is calculated in the rates being charged to their clients, and the margins on existing rates will not support this increased cost. Unfortunately, someone is going to have to pay for the healthcare coverage that will be offered to temporary employees.
- Scope of benefits offered if any
- Employer contribution if any
- Expected employee participation rate
- Employees excluded from coverage for various reasons
- Employees receiving subsidies
- Cost of making employees whole if the company drops coverage
- Tax deductibility of premium vs. the non-deductibility of excise tax
- Competitive market position, recruitment and retention