Which Employees Qualify for Health Insurance Under the ACA?

Oct 17, 2013

Now that the government is back to “business” without significant changes to the Affordable Care Act, the time has come to tackle another difficult question presented by the ACA. A few months ago, when we believed that January 1, 2014 would be the effective date of the employer mandate, I wrote a post about how to determine if you are a large employer under the Affordable Care Act. You can read that here: https://www.mwblawyers.com/employmentblog/?m=201301

If you have determined you are a large employer, the next question to answer is, “To which of your employees are you required to offer health insurance?” As you may have guessed, that answer is also not an easy one. However, it is an important one and an important one to consider right now. With the employer mandate postponed until January 1, 2015, you have another full 12 month period to determine which of your employees meet the definition of “full-time” under the Act and to make changes to work schedules if you want to alter that result. I have also posted about some concerns and potential risks associated with altering work hours in response to the ACA. You can read that post here: https://www.mwblawyers.com/employmentblog/planning-to-reduce-employee-hours-to-minimize-cost-under-the-aca-consider-the-risk/

Under the ACA, if an employer qualifies as a “large employer,” the employer is only required to provide health insurance to its employees who are “full-time,” defined as working more than 30 hours a week. For regular full-time employees, this is not a difficult question. However, for employees who do not work a set schedule and whose hours fluctuate week to week, this question can get complicated. Clearly an employee’s eligibility cannot change week to week depending on the number of hours worked. So the ACA has established rules to help employers determine when an employee qualifies as “full-time.”

For the first year of the ACA, employers may designate a 3 to 12 month look-back “measurement period” for employees to determine whether the employee averages working 30 hours or more per week. Based on the average hours worked per week during the measurement period, the employer makes a decision about the employee’s eligibility for healthcare for what is known as a “stability period.” During the stability period, the employee’s eligibility status does not change. For employees already employed on January 1, 2015, an employer must have a stability period of at least 6 months and the stability period cannot be shorter than the measurement period. The expectation is that most employers will select a measurement period of 12 months with a corresponding stability period of 12 months because anything less would be a logistical nightmare. Since 2014 will likely be the 12 month measurement period for most employers with variable hour employees, any changes employers wish to make to their workforce need to be made very soon.

For employees hired after January 1, 2015, a similar rule applies. For employees hired with an expectation to work full-time or at least 30 hours per week, the employee should be offered coverage immediately (within the confines of the plan requirements). If the employee is hired to work a variable schedule, then the employer may choose to have up to a 12 month measurement period with a corresponding stability period. Employers will not be penalized for employees who seek coverage from an exchange during their measurement period. Again, due to logistical issues, the expectation is that these measurement and stability periods will likely be 12 months long. However, employers should be aware that the proposed regulations prohibit employers from requiring employees who are eligible for health care from having to wait more than 13 months from their date of hire for coverage. As a result, employers choosing a 12 month measurement period need to insure that employees that are determined eligible for coverage can begin receiving coverage within 30 days of their eligibility determination.

Large employers with a seasonal workforce should take particular care in assessing individual employee eligibility. As I explained in my previous post on how to determine “large employer” status, employers who hire seasonal workers may be exempted from large employer status if their workforce is above 50 employees for less than 120 days per year. This provision does not benefit a lot of industries with a seasonal workforce, however, because many have a season of more than 4 months. The good news for these employers is that the definition of seasonal employee for the determination of large employer status is very different than the definition of seasonal employee when determining which employees are eligible for coverage. The definition of “seasonal employee” used when determining individual eligibility for coverage only requires that employers use a “reasonable, good faith interpretation” of the word “seasonal” to determine individual employee eligibility. It contains no definite time periods of hire or other parameters. As a result, agriculture, landscaping, tourism, restaurant, and other seasonal employers who qualify as large employers because their seasons are longer than 4 months are likely able to exclude large numbers of their workforce from coverage eligibility based on this definition of a “seasonal employee.” The Treasury and IRS have indicated that final regulations may tighten this definition in the future, but for now, the seasonal employee exception may prove very significant for many employers, especially those in Western North Carolina.

The question of exactly how and when penalties will be imposed on employers who do not comply with the ACA is another important piece of the equation for employers to consider. I will take that question up in a future post. As I will explain, large employers with a majority of seasonal employees may run little to no risk for offering no coverage to their non-seasonal workforce.

Of course, this post is based primarily on proposed regulations because we still have very few final regulations from any of the governmental agencies that are tasked with implementing this law. If this line sounds familiar it is because I have been saying these same words for the last ten months when writing about the ACA. We should get more final regulations in the next year, but I’m not holding my breath….Are you?

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