Frequently Asked Client Questions – The Affordable Care Act
Do you plan to offer compliant insurance?
Yes, we offer insurance that complies with the ACA requirements for Minimum Essential Coverage and for Minimum Value. The insurance is priced to be affordable under the Act for all our employees. Coverage for spouses and family is available as an option. Because we are fully compliant, there is no risk of our clients having to assume costs or pay penalties.
Do you plan to charge more for employees taking coverage?
No. ACA compliance creates significant costs beyond the insurance premiums. We have to track complex eligibility rules against actual work hours, make and track offers of insurance to all eligible employees, and complete detailed government reports on our entire workforce, whether employees opt to take insurance or not. For that reason, we intend to spread the total compliance cost across all employees and client assignments to produce the lowest cost for everyone.
What will it cost us?
That is somewhat dependent on how you choose to utilize temporary employees, but the top of the range for our clients is less than 2%. We will call out ACA compliance costs as a small itemized surcharge on a separate line of our invoice. Fortunately, our ACA costs will be far less than your own, if you had to manage compliance yourself. Because our workforce is largely temporary and special rules apply in the regulation, a much smaller percentage of employees will be eligible for insurance. In addition, the economies of scale we gain by being part of the Xcentri program further reduces administrative costs.
How can we avoid or reduce any increased costs for ACA?
Costs are naturally less for staffing firms, since the regulation includes special provisions for temporary, seasonal and part-time employees, and a smaller part of our workforce is full-time and eligible for health insurance. In addition, by being part of the Xcentri program we have lower costs for insurance, administration, and reporting, since those costs are shared by many firms and spread across thousands of other employees.
None of our temporary employees are full time. Why are you charging me?
For most staffing companies, the administrative costs of ACA compliance are actually greater than the insurance costs. Every employee’s work hours have to be tracked and reported against complex eligibility rules. That requires special software as well as considerable work. We have to offer insurance and maintain enrollment and administrative resources even if no one takes the insurance. Of course, you avoid all that cost by using our personnel. ACA costs are like unemployment and workers’ compensation costs. Almost every employer is required to pay the cost, but we don’t bill clients more if an employee at your worksite files a claim.
How does this impact our contingent workforce strategy? More or fewer Temporary Staff?
Many things can impact that decision. However, there are already great cost advantages to augmenting your workforce with contingent personnel. The ACA adds more reasons. The cost of ACA compliance is generally lower for staffing companies because we have fewer full-time employees, so the total insurance cost is less. Plus, you completely avoid the equally or more expensive cost of administration and reporting.
Can our company be liable for ACA costs if your firm fails to comply?
No. The responsibility for compliance lies exclusively with the common-law employer. Many years of case law clearly establishes a temporary help firm as the common law employer, not the client. That’s why we fully indemnify you and protect you from any liability for costs related to ACA compliance or noncompliance. The common law employer and the ACA responsibility is different in a PEO arrangement.
Can I somehow get caught up in having to pay penalties if I use your company?
No. You have no responsibility under the ACA for contingent workers provided by a temporary agency. We offer fully compliant and affordable insurance, so neither we nor you are subject to any penalties under the Act.
Why shouldn’t I go with a staffing firm that isn’t offering benefits?
Over the long term, if not immediately, you will pay a lot more – or see the other staffing firms experience significant financial stress and possibly fail. Xcentri, along with our expert advisors, have done extensive modeling of the “Pay” or “Play” decision. They can show that the average cost for a staffing company paying the penalties is almost 9 times as much as those offering insurance. If a company is going to pay penalties, they will have to pass that cost on in some way. Some smaller companies simply do not have the volume the insurance carriers require, or the resources to administer ACA compliance. Xcentri does not have that challenge.
Why don’t I limit employee work hours to 29 per week?
Regulations do not prohibit that currently. However if it is only to avoid ACA requirements, it seems almost certain that loophole will eventually be closed. Also, there are numerous practical issues and added costs associated with limiting hours:
- Twice as many employees in any time period
- Recruiting costs increased 100%+
- Twice the training/orientation time
- Twice the claims/litigation opportunities
- Increased turnover as Ee’s seek F-T employment
- More payroll subject to FUTA/SUTA (greater burden costs)
- Increased UE costs as hours are cut (in most states)
- Impact on client’s overall productivity?
- A smaller pool of candidates seeking part-time work
Do you have the systems and resources necessary to track employee eligibility and administer an insurance and ACA compliance program?
Yes. We have developed or purchased ACA-specific software or tools to manage to the very complicated measurement and stability period eligibility rules, and we have the administrative support in place to manage the required insurance enrollment, payroll deductions and government reporting.
Do you offer the Minimum Essential Coverage and a Minimum Value Plan?
We do — which is not true of all agencies. Some may be too small to meet the insurance carriers’ minimum participation requirements, or they may not have the expertise, the systems or the resources to administer an ACA compliance plan. And if they believe it is less expensive to pay penalties, they likely misunderstand the penalties under ACA or have miscalculated penalty costs.
What is the deductible employees pay under your health insurance plan?
The deductible that employees will pay is less than $250. Some plans achieve premium affordability by increasing deductibles to levels well beyond what the average employee is capable of paying. The value of such plans to the workforce is questionable at best.
Will you indemnify us, the client, from any costs or penalties that may be imposed under the ACA related to your employees?
Yes, our staffing firm is fully compliant under ACA and we accept that responsibility fully. As with other statutory employer requirements, we contractually indemnify our clients and protect them from liability for any fines, penalties or taxes that may be owed due to any noncompliance on our part.