Avoiding the Affordable Care Act Is Risky Business
While the Government has been struggling to find ways to implement and enforce the Affordable Care Act (variously referred to as the Patient Protection and Affordable Care Act, Obamacare or simply the ACA), employers have been struggling to find ways to minimize its impact.
Here are a few strategies that have surfaced:
Litigation and Lobbying. At last count, there are at least 108 lawsuits pending in federal courts nationwide. Each seeks to dismantle all or part of ACA, limit its application, remove its funding or delay its implementation. Employer associations are expending vast amounts of money to fund this tidal wave of litigation. Although the Supreme Court of the United States has affirmed the underlying constitutionality of the statute, virtually every aspect of its implementation has come under legal attack.
The object of these challenges is to so cripple the legislation that it will have to be returned to Congress for modification. This tactic has been successful, but only to a limited extent. For example, several lower courts have ruled that specific provisions concerning tax issues cannot be enforced until necessary regulations have been drafted by the Internal Revenue Service. These attacks and subsequent appeals, are bound to last for the foreseeable future.
If the litigators don’t stop the ACA, employers are hoping that their lobbyists will. There is a virtual army of lobbyists besieging the capitol with the sole aim of bringing down this very controversial legislation. Two direct results of this campaign have been the recent governmental shutdown and a one-year delay in implementation of ACA “mandates” on large employers —until January 1, 2015.
Limiting the workforce. The most far-reaching provisions of the ACA apply to “large employers.” This term is defined to mean employers that employed at least 50 full-time employees or “full-time equivalents” during the preceding calendar year. The automatic backlash was an immediate freeze on hiring by small companies. By staying under the 50-employee threshold, many companies sought to avoid provisions enforced by the ACA.
Reducing hours. Similarly, because “full-time” employment is defined as 30 hours per week or 130 hours per month (including hours for sick pay, vacation and holidays), employers have cut back on the hours available to their workforces. Those employers who find it necessary to hire have offered only part-time jobs.
ACA has reinvigorated the use of “independent contractors” by many companies. Independent contractors do not count as either full-time employees or full-time equivalents. The true status of a worker as an independent contractor or employee under wage and hour laws has been the subject of litigation and administrative prosecutions for years.
Already at an all-time high, the number of such “misclassification” litigation is now guaranteed to reach new peaks as employers desperately seek to avoid crossing the 50-employee mark. As noted in several previous articles, this is a very risky strategy, often resulting in catastrophic liability. It is not uncommon for this kind of liability to force employers into bankruptcy.
Terminating medical plans. This is one of the most radical strategies that large employers have tried yet. Health insurance premiums have been rising ever since the ACA passed into law in 2010. Rather than absorb these ever-increasing costs, some employers have stopped offering healthcare coverage altogether.
Instead, they are providing their employees with cash stipends and instructing them to purchase their own coverage on the healthcare exchanges that have been set up under the ACA. While this has the advantage of fixing cost and permitting employees to purchase the coverage that is most appropriate for them and their families, there are risks.
Depending on the employees’ level of income, they may be entitled to receive federal subsidies to be applied toward the cost of their healthcare coverage. If the employer forces its employees onto the exchanges and the employees become entitled to subsidies, the employer will be subjected to penalties in the form of excise taxes.
Therefore, in the case of low wageworkers, the choice for employers boils down to calculating the lesser of two evils: paying increased insurance premiums or suffering the imposition of punitive taxes.
A word of caution is in order. None of these stratagems is foolproof. ACA has spawned the creation of a whole new industry of brokers and consultants whose purpose is to design the most cost-effective healthcare strategy possible. However, ACA compliance is a moving target. The law and regulations are not yet fully drafted. Timelines and requirements are continually changing.
Undoubtedly federal regulators will observe employers’ reactions and will implement new and ever-more comprehensive regulations designed to maximize coverage. This cycle of strategy and counter-strategy will be going on for a long, long time. Keep abreast of the latest developments or risk falling behind.
Perry Heidecker is senior counsel for Milman Labuda Law Group PLLC, Lake Success, N.Y. The firm is a full-service Employment Law practice focused on counseling, preventive advice and training, policy and procedure design, representation before administrative agencies, litigation, and appeals.
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