Health Care Reform Employer Question

A response to a question from a concerned employee.

Question: Why is an employer of several employees opting to hire only part time people now with the health care reform bill–why aren’t the penalties for doing this more severe?

Response: Some employers are indeed responding to the health reform bill by changing their workforce structure which may include changing their workforce to include more part time employees. This is a strategy, in part, to avoid the pay or play shared responsibility penalties which is levied on full time employees (working greater than 30 hours per week) who receive a subsidy on the exchange. In cases where an employer doesn’t offer health insurance, the penalty is based on all full time employees if one full time employee receives a subsidy on the exchange.

As health reform becomes more clear, employers are going to formulate these changes into their strategic planning. On the one hand they will look to long term financial viability or how these changes impact financial performance. On the other hand employers will want to understand how potential decisions will affect key qualitative priorities such as employee morale, satisfaction, corporate image, etc.

One thing is for certain, it is becoming increasingly difficult for employers to be able to afford year over year increases in their health insurance premiums.

Incarcerated Employees on Work Release

Specific and unique questions about Health Care Reform’s impact on businesses continue to come up. Today, our topic of conversation surrounds incarcerated individuals on work release from prison. Is the employer required to offer insurance to employees on work release and their dependents? The Kaiser Family Foundation published an article in April 2010 stating, “Qualified individuals include U.S. citizens and legal immigrants who are not incarcerated, and who do not have access to affordable employer coverage”. In short, the answer is no, an employer will not be subject to a penalty unless that individual gets a subsidy off of the exchange. Incarcerated individuals are not allowed to use the exchange.

Higher Insurance Costs

Organizations may face higher insurance costs if they have low enrollment, are not currently offering insurance and when the shared responsibility penalties exceed the cost of coverage.

Businesses have much to consider when it comes to Health Care Reform:

• Nondiscrimination: Does your health plan provide richer benefits to higher paid employees?
• Cadillac Plan Tax: Do you offer plans with premiums in excess of the Cadillac plan limits?
• Full Time Employee Employer Safe Harbor: Measuring hours to classify employees as either full or part time over the current period.

Eide Bailly encourages businesses to:
• Identify someone to monitor issues and the impacts of Health Care Reform.
• Follow what’s happening with the set-up and organization of the federal and state health care exchanges.
• Review your employee benefit plan design and possible options.

Eide Bailly’s Employer Health Reform Analytics can help you make an informed decision and our professionals can provide the tools and support to make the decision easier.