Preparing to Provide Workforce Coverage in 2015
Beginning in 2015, the Affordable Care Act (ACA) requires large employers to provide health care coverage to every full-time employee (FTE) or pay a penalty. This requirement is referred to as the “play or pay” mandate. As such, many employers are now in the process of examining which option might represent the best direction to consider.
Within this process, employers are searching for strategies to provide health care benefits to those newly eligible under the ACA – those working between 30-39 hours per week. At the same time, employers are trying to maintain benefit levels for current employees, knowing that health insurance rates are increasing, new ACA fees and taxes are being added, and more people will be added on the health care plans. All of this means higher spending at a time when resources are still relatively scarce.
One means for controlling costs is for administrators to regularly monitor the part-time positions that are assigned less than 30 hours per week, or fewer than 130 hours per month. This is especially important for those positions that tend to have extra hours assigned. By ensuring that these positions remain “part-time,” health care costs can be managed more effectively. If not, the financial consequences for a couple of hours going unnoticed every month can be significant.
There are two ways to track if an employee is going to work enough hours to reach FTE status. The first method would be for the employer to determine FTE status on a monthly basis. This is not the preferred method as it requires significant administrative resources. The second way to determine if an employee is an FTE would be to use the look-back method.
The look-back method uses a Measurement Period (MP) to determine if an employee is an FTE. If the employee averages at least 30 hours per week (130 hours per month) during the MP, they are considered to be an FTE and must be offered health coverage for a mandatory Stability Period (SP). Here is an example of how hours being worked now could have an effect on future FTE status. (For simplicity of illustration, the optional Administrative Period is not shown):
Employee hours worked from 7/1/13 to 6/30/14 will be used to determine if the employee is an FTE and must be offered coverage for the 7/1/14 to 6/30/15 SP. If the employee did not average at least 30 hours per week (130 hours per month) during the MP, they are not an FTE and do not need to be offered coverage for the mandatory stability period. If an employer wishes to preserve an employee’s part-time status to avoid the 2014 “play or pay” mandate, they need to manage the hours their employees are working in 2013. Employers should set up a procedure for supervisors to review status of employee work hours at the mid-point of the Measurement Period and take appropriate action. For more information, please contact your Keenan Representative.