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30 Is the New 40 According to the Employer Mandate

30 Is the New 40 According to the Employer Mandate
Posted on Friday, January 24, 2014 by Businessolver Team
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“We have heard the concern that the reporting called for under the law about each worker’s access to and enrollment in health insurance requires new data collection systems and coordination… [we will] suspend reporting for 2014.”

Valerie Jarrett, Senior Advisor to the President, on July 2, 2013

THE GOOD

The intention of the Affordable Care Act (ACA) is to make healthcare affordable for every American. Fair enough. In that same spirit to offer affordable healthcare to every American, the government included an employer mandate that requires all firms with more than 50 employees to offer healthcare benefits to all full-time employees, or pay a penalty.

THE BAD

The definition of a “full-time” employee has rightfully come under scrutiny. By setting the standard full-time employee hourly threshold to 120-hours-per-month, or 30-hours-per-week, not the expected 40-hour-per-week standard, employers will have to redefine who is considered full time and who is considered part time.

“Historically, full time has been defined as 40 hours a week, and we would like to see that definition be restored.”

– Katie Mahoney, Executive Director of Health Policy at the U.S. Chamber of Commerce

The Fair Labor Standards Act has traditionally referred to 40 hours as the standard work week for a full-time employee, creating a number of provisions around a 40-hour work week, specifically when calculating overtime pay.

This new definition of a full-time employee places an additional burden on employers to determine who now qualifies for benefits and how to track employee hours.

This means:

1) Employers will have increased healthcare costs.

By offering healthcare to more employees that fall under the “full-time” status, employers will have increased costs in their healthcare spending. To combat this, they will get creative and find ways to manage just below the 30-hour threshold for full-time status. And they are, according to a new study from Investors.com.

2) Employers will have to get creative with time tracking.

If employers are managing to a 30-hour threshold, they are going to have to figure out how to track employee hours. Employers that pay employees based on services provided will need to get really creative or rely on external administrators to help ease the burden.

THE REALITY

When faced with increased costs in one area, employers are either going to find ways to eliminate that cost or cut in other areas. That affect is already being realized in the new study from Investors.com.

If the new magic number is managing to 30 hours a week, employers are going to find ways to manage below it or eliminate benefits. At its worse, the mandate may encourage employers to consider downsizing to avoid the burden of the mandate (however, requirements also exist for firms with fewer than 50 employees).

But even scheduling employee hours to fewer than 30 hours comes at a cost to employers – in the form of production and, therefore, cost to the employer. If employees are working fewer hours, they have fewer hours with which to be productive for the company. If internal administrators are focusing on time management instead of other areas, like profitability and production, that is also a cost to employers.

THE CATCH

At the heart of the mandate is the expectation that employers can track employee time. The catch? The system has to be compliant. If employers don’t have the time or means to track employee hours, who will? Some benefits administrators can lend a helping hand if they are staying ahead of the mandate guidelines. However, without definite guidelines from the government, we are all at an impasse. Employers can’t prepare for compliance requirements and benefits administrators cannot execute on system updates to prepare for upcoming guidelines.

Before any further discussions about the timing of implementing the employer mandate occur, the government needs to reconsider the unintended consequences of the mandate and the unnecessary burden on employers. If employees have access to a public exchange, what’s the impact of not mandating employer-sponsored healthcare? Do the unintended consequences of enforcing an employer mandate outweigh the intended benefit?

In reality, some of those every Americans the mandate intends to protect, may, in fact, be the unintended victims.