The Impact of the Affordable Care Act on the Staffing Industry

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On March 23, 2010, President Barack Obama signed the Affordable Care Act (ACA). The purpose of the act was to make health care more affordable and accessible than ever before and require all Americans to have coverage, or else pay a penalty. As we near the five-year anniversary of the signing, we are still evaluating its successes and failures. For many, the ACA may feel like peeling back a never-ending onion.

When the ACA went into effect, staffing agencies knew it would directly affect the industry. The act states that companies with more than 50 employees must provide insurance to their employees. Many growing organizations were worried about the repercussions. There were varying opinions of how this law would affect the workforce, but many employers viewed staffing agencies as a solution to avoid paying group health insurance. Read on to learn how the ACA has affected hiring and how it may influence staffing decisions in the future.
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The ACA’s Effects on the Staffing Industry
With ACA specifics and mandates continually changing, it’s tough to fully grasp how the staffing industry will be impacted. There are more than 15,000 pages of rules and another 45,000 pages of guidance for the employer mandate. One question that’s top of mind for many companies: Are employees of staffing agencies considered benefit-eligible or can staffing agencies get away with not paying benefits? It depends on who and when you ask. The rules in 2013 differ from 2014, 2015, and 2016. Ultimately though, yes, some agencies will be responsible sooner than later, so it’s worth taking the time to understand the law to the best of your ability.

Consider this: Employees that work through a temporary staffing agency intended for short-term assignments have been presumed employees of a temporary staffing agency. As a result, agencies are responsible for offering appropriate coverage and determining whether it is subject to the employer mandate penalties.

The IRS discussion of temporary workers gets even trickier. Based on all of the facts and circumstances, the staffing firm is the common law employer of the worker performing services for a client organization, and therefore the responsible party for the employer mandate. Thus, an agency shouldn’t advertise for companies to use their services in order to avoid the ACA penalties.

In 2013, The Wall Street Journal, The New York Times, The Los Angeles Times and PBS linked an increase in part-time hiring to the ACA. While correlation does not mean causation, it’s easy to see how some employers figured they could avoid health care costs by outsourcing individuals to agencies. This accusation stemmed from the idea that the economy was still in recovery. Keep in mind, there’s no solid proof the ACA actually caused an increase in hiring.

In 2014 there were more than 3 million jobs added, which was the largest number of hires since 1999. To break this down further, that equates to 260,000 jobs per month, 2,771,000 more people employed, and 2,694,00 more full-time workers. Additionally, 72,000 more people were working part-time in 2014. It would be very difficult to determine exactly what percentage of recent part-time workers or temporary hires were a direct result of the ACA, but it’s clear the mandates played a role in many companies’ hiring decisions.

The impact of the ACA on 2015 hires is anyone’s guess. With the number of changes that have already occurred, it’s tough to know for sure if the predicted mandates for 2016 will truly go into effect when the time comes. An election could change everything, but as of today, there is a plan in place for the next several years.

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Effects of the ACA on Smaller Businesses
If a company has fewer than 50 employees, then stipulations of the ACA are less pressing (though for growing companies, it’s important to stay informed). When staffing agencies reach 100 full-time employees or more, they are subject to “play or pay” requirements. This means the agency is responsible for a non-tax-deductible excise tax if at least one full-time employee is eligible for subsidized coverage. There’s the option to pay if you don’t offer minimum essential coverage, or there’s the option to offer that coverage instead.

If you head a smaller business, you may want to consider that the economy is improving. With rapid growth, it’s important to prepare for the day when your organization grows and will be subjected to the ACA mandates. Considering we have already seen many revisions of the original law, things could change again, and smaller businesses could be affected. Keep an eye out for these potential changes. Staffing companies should also plan ways to absorb the costs of healthcare coverage when they reach that affected number of hires.

Without realizing it, staffing agencies could be in the 100-employee bucket quickly. Read below to determine what you need to know if you are a staffing agency. You may be closer to the 50- or 100-employee mark than it seems.

Effects on Larger Businesses & Mandates
In 2014, employers subject to the employer mandate must have made an offer of group health plan coverage to at least 95 percent of all their full-time employees or face the prospect of a penalty.

Entering 2015, healthcare employers are anticipating this year’s employer mandates. There are penalties that come in two forms: the no-coverage penalty, and the inadequate coverage penalty. The no coverage penalty may be triggered when full-time employees receive premium assistance in the marketplace. That penalty is generally $2,000 per full-time employee. The no-coverage penalty applies if an applicable large employer (ALE), an employer with 50 employees or more, fails to offer substantially all full-time employees health coverage. An employer is deemed to have offered substantially all of its full-time employees and their dependents coverage if at least 95 percent of the employer’s full-time employees (along with spouses and dependents) are offered coverage. An inadequate coverage penalty may apply when health coverage is offered but fails to meet the minimum value and affordability thresholds, which is generally $3,000 per full-time employee. In 2016, the employer mandate will be mandatory for companies with 50 to 100 employees.

Since the IRS deems temporary staffing agencies as ALEs, it is important to understand what the ACA considers a full time employee.

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How Companies Try to Avoid Mandates
Many agencies will try to circumvent the rules. There are things you can and cannot do to avoid ACA mandates. If you work fewer than 30 hours a week, you are in the clear. Terminating or trying to reassign employees from achieving ACA status may violate the Employee Retirement Income Security Act (ERISA).

The ACA and Hiring From This Point On
As a business with 50 employees or more, or a staffing company that employs 50 contractors or more, it is important to stay abreast of all the changes. The minute your business understands the ACA, the law may switch gears. The changes from 2010 to now have been drastic. The fines are strict and the insurance is expensive. Not every employee will choose to have insurance, but knowing your organization will be forced to offer insurance will be a big expense to most employers. Now is the time to prepare for impending costs. These aren’t just guidelines, they are enforced laws. Organizations will try to do what they can to avoid the mandates and penalties, but both the employer and the staffing agency will be responsible. An election could very well change the outcome of ACA mandates. But for the time being—and for the foreseeable future—the ACA is here to stay and will pick up steam in the years to come.

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3 comments

Did you know that the Affordable Care Act is effecting the staffing industry? The ACA regulations put into effect state “that companies with more than 50 employees must provide insurance to their employees.” The new regulation has had a great impact on staffing, hiring and the staffing industry’s future. The following infographic from Akken Cloud will give you some insight on the relationship between the ACA and the staffing industry as a whole. To read more about the infographic you can visit the Akken Cloud blog.

As of right now, is there anything that says PEO’s are ALWAYS considered the common law employer? Also, is there anything in the safe harbor guidance that allows staffing agencies to work around ERISA when trying to avoid making a worker full-time?

Some legal staffing agency needs to know about this. There is affordable care act that should be applied in every staffing industry so that the employees will have the benefits and will also improve their performance in the industry.

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