Careful calculations by employers will be needed to determine how the Patient Protection and Affordable Care Act, often called "Obamacare," will affect them, according to a specialist on the new law. Washington, D.C.-based labor employment attorney Leon Sequeira, a consultant on health care reform for the American Farm Bureau Federation and a former assistant secretary of the U.S. Department of Labor, spoke to the California Farm Bureau Federation Leaders Conference in Sacramento last week.
Sequeira provided general background on the 2,700-page law, which takes full effect beginning in 2014.
"Health care is increasingly becoming an important issue for all employers, particularly agricultural employers," Sequeira said. "We continue to get guidance from the federal agencies that are going to implement this law. You need to talk to a lawyer or an accountant when trying to figure out how this is going to apply to you."
An employer who averages 50 full-time or full-time-equivalent employees per month will be required to provide "minimum essential" health coverage to all full-time employees and their dependents (not including spouses). Employers that do not provide coverage will be assessed a penalty. If employees go to the state health insurance exchange—a clearinghouse where people can choose from a variety of insurance products—to obtain insurance, employees would receive a tax credit or subsidy.
To determine whether the employer mandate applies, Sequeira said, a business is an "applicable large employer" if it averages 50 or more full-time or full-time-equivalent employees per month during the course of the year. A "full-time employee" is one who averages 30 hours per week, or 1,560 hours per year. According to the IRS, Sequeira said, this can be counted monthly as well, which means anyone who works 130 hours per month is a full-time employee.
"You must determine the number of full-time employees you have every month, so that is everybody that works, on average, more than 30 hours per week," Sequeira said. "To determine your full-time equivalents, take all of your part-time workers—those who work less than 30 hours per week—add up all of the part-time hours per month, and divide by 120."
The calculation must be repeated for all 12 months in the year to determine the average number of employees per month.
"If you average more than 50, then you are an ‘applicable large employer’ and you have to provide full-time employees with health care coverage. But before you get there, there’s one other calculation," Sequeira said.
If the employer exceeds 50 employees per month and has seasonal workers—those who work for fewer than 120 days in a year—the employer may subtract those seasonal workers from the calculation. Sequeira noted that the IRS is asking for public input on parameters for seasonal workers, which means that this will eventually be further defined.
If, come next year, an employer is unsure about whether it has full-time employees because employees have variable hours during the course of the year, the employer will need to look back to 2013 and calculate the hours employees worked to determine whether or not they should be treated as full-time.
"Looking back in 2013, the government says you can pick the measurement period over which you want to look to determine full-time status. That measurement period can be from three months to 12 months," Sequeira said.
In addition to the "look back" period, the government provides an administrative period—a waiting period that can be up to 90 days before coverage begins.
The employer is required to provide coverage that meets the minimal essential requirements and is affordable. Sequeira told the group that "minimal essential" coverage has not yet been defined. As for "affordable," the employee premium cost for the coverage cannot exceed 9.5 percent of that employee’s household income. The IRS says the employer can use 9.5 percent of the employee’s W-2 income. In addition, the plan has to meet at least 60 percent of covered expenses.
"If you don’t provide the coverage that you are supposed to, there are penalties for failure to provide minimum essential coverage, or the failure to provide affordable coverage," Sequeira said.
Nursery operator Kathye Rietkerk, a CFBF board member from Fontana, inquired if penalties can be assessed if the employer offers coverage and employees contact the state exchange anyway. Sequeira’s advice was to offer health insurance coverage to employees as part of the hiring process.
"As part of the hiring process, you are going to put in front of them a piece of paper that says, ‘I’ve been offered coverage and I decline it and here is my signature.’ Then lock that piece of paper up in a safe," he said.
Employers that do not have to provide employees with health insurance are those who never have more than 50 employees in a month. However, employers that come close to this figure, Sequeira said, need to be very careful and consult with a lawyer or an accountant. The law also does not apply to employers that don’t hire full-time, year-round employees.
"Even if you average 50 or more employees per month, if none of your employees are full-time for 12 months, you don’t have to provide health care coverage," Sequeira said.
To learn more about how to negotiate the Affordable Care Act process, employers may contact the Farm Employers Labor Service, a CFBF affiliate, at info@fels.net or 800-753-9073.
(Christine Souza is an assistant editor of Ag Alert. She may be contacted at csouza@cfbf.com.)