The Impact Of Healthcare Reform On Staffing Companies
In March of 2010, Congress passed the Healthcare Reform Act, referred to by many as Obamacare. A number of provisions of this bill have been changed or repealed, many details have yet to be finalized and the individual mandate requirement will come before the Supreme Court next year. Regardless, most experts agree that the core concepts of this bill are here to stay and healthcare reform will go into effect in one form or another in 2014.
Right now, most
staffing companies offer health insurance to their own full-time employees, not temporary and contract workers. In 2014,
staffing companies will be required to offer minimum essential coverage (details to be determined) to all employees including eligible full-time temps and contract workers. It is expected that those who work 130 hours per month for three months will become eligible.
Although no employer contribution is required, significant penalties will exist for those who do not contribute. An option will exist for companies who do not wish to supply a healthcare plan. This option will be to pay an excise tax of approximately $2000 per employee per year. In the case of temporary or contract staffing firms, neither the fine nor the contribution to the premium is calculated in the rates being charged to their clients, and the margins on existing rates will not support this increased cost.
Bottom Line: Someone is going to have to pay for the healthcare coverage that will be offered to
temporary employees
Because many temps and contract workers are hired for short-term or seasonal positions, turnover is high. Less than 20% stay in the same position for more than six months. These facts raise obvious concerns, from tracking employee eligibility to compliance and regulatory nightmares to concerns about cost. Some staffing firms are in denial or just have their heads in the sand because 2014 seems so far away. Others think it makes sense to just pay a fine instead of offering coverage.
We at Bear Staffing want to send a clear message to our clients. We’re on it.
While we cannot promise that our clients will not see an increase in rates come Jan 1, 2014 to pay for healthcare, Bear Staffing is proactively dealing with these issues now and working on real solutions to minimize the impact of healthcare reform. We’re partnering with health benefits consultants to compare the estimated cost of coverage with tax cost, taking a number of factors into consideration, including:
- Scope of benefits offered if any
- Employer contribution if any
- Expected employee participation rate
- Employees excluded from coverage for various reasons
- Employees receiving subsidies
- Cost of making employees whole if the company drops coverage
- Tax deductibility of premium vs. the non-deductibility of excise tax
- Competitive market position, recruitment and retention
As the details of healthcare reform are resolved, we’ll begin to see a clearer picture of how the bill will look in its final form, and
Bear Staffing will be ready for 2014. This is just one more factor that we take into account as we constantly strive to improve efficiency and quality for the clients and communities we serve. For further information or for questions, please feel free to contact us at
gjohnson@bearstaff.com.