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Oct 01, 2013

Can’t we just sidestep the ACA?

By: Paul Ebeltoft

While Congress has partially shuttered the United States government over demands to defund, delay or otherwise amend the Affordable Care Ct (ACA), more portions of the law, in place now for three years, took effect on October 1. From a business and HR standpoint, one of the pressure points of the law is determining which set of rules applies to your business. Some employers would like to bend these rules so that the ACA will not apply to them.

A recap

As I explained in this column more than a year ago, the ACA does not require any business to provide health benefits to their employees. What it does do, starting in 2015, is penalize larger employers who do not make affordable coverage available to employees and their families.

The penalty is $3000 annually for each full-time employee who chooses coverage from an insurance exchange and receives a premium tax credit. The penalty is capped at the amount of $2,000 per full-time employee minus the first 30 employees. The penalty adjusts upward each year by the percentage rate of health care cost increases.

On the other hand, if your business is one of these “larger employers” and currently offers health coverage to its workers that pays at least 60% of covered health care expenses for the typical population and does not require any employee to pay more than 9.5% of family income for the employer offered coverage, there is no penalty at all. This is because the law finds that these employers have already provided affordable coverage.

So, what’s the problem?

The problem is that some employers who do not offer health care insurance at all, who offer substandard policies or who require their employees to pay too much for their policy are seeking ways to avoid the penalty. I hope this does not describe your business. If it does, you may be an HR professional facing a boss who wants you to fix the problem by cutting back on employee hours. An ACA “full time employee” is one who works 30 or more hours a week. “If I can cut back enough employees to get below the 50 full time employee threshold,” these bosses reason, “my business will not have to offer affordable coverage and will face no penalty.” Beware.

What’s the risk?

The Employee Retirement Income Security Act (ERISA) governs almost all types of employer-sponsored health care plans. This law provides in part that “[i]t shall be unlawful for any person to discharge, fine, suspend, expel, discipline or discriminate against [a covered employee] for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan…”

The last part of the quotation is the key. Your boss may not be able to take an action adverse to your co-workers that interferes with attainment of a right – in this case the right to affordable health insurance coverage. “But,” your boss will say, “I am only lowering the hours my employees work because I have a legitimate business need to manage my overhead costs.” Perhaps this is true, but it is part of your job as an HR professional to be able to tell your boss the risks of the proposed action. Here the risk is stepping off the end of the dock without a single court case yet decided about the possible interface of ERISA and the ACA. No business should wish to be the test case.

We won’t get caught! Will we?

Some employers, again I hope that it is not yours, will press HR to approve hour reductions on the theory that the business is just a small fish in a large pond and that the federal government will be too stressed by implementation to do much enforcement, particularly of smaller players. Teenagers never believe their mothers when they say, “don’t worry, honey, no one will notice.” HR should be no less skeptical and respond with advice to avoid the temptation to create artificial schemes to avoid the provisions of the ACA.

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Reprinted with permission from an article submitted for publication in the October, 2013 Southwest Area Human Resource Association newsletter.