For the next few minutes please turn off your political switch and turn flip on the economic lever. The passage of the Affordable Care Act (Obamacare) has changed the way businesses staff their operations. Employers with 50 or more Full Time Equivalent employees will at some point be required to offer an approved and affordable health plan to employees working more than 30 hours per week. Failure to do so will result in a fine of $2,000 per employee per year, not counting the first 30 uncovered employees. If an uncovered employee qualifies for a subsidized plan from an exchange (75% will), your fine can increase to $3,000.
For this and a host of other reasons found in 2000 pages of legislation and countless interpretations, extensions and guidelines employers with 49 Full Time Equivalents will do anything possible to avoid hitting 50 and thus adding tens of thousands of dollars of insurance expense or tens of thousands of dollars of non-deductible fines.
Employers who have offered tiered plans or carve outs to the staff now face fines for discriminating against lower wage employees. It is either illegal or will be illegal to offer a lesser plan to lower wage employees.
Businesses are now financially and legally incentivized to OUTSOURCE. School districts are even outsourcing cafeteria workers and crossing guards to be able to continue high value plans for credentialed staff and avoid having to provide plans to lower wage employees which could exceed their individual payroll. Outsourcing is a method of providing a "virtual carve out".
Total payroll for the staffing industry has now returned to pre-recession levels according to the ASA. 2% of labor is now outsourced. These numbers are not due to robust economic growth, but to a structural change to the hiring patterns of American businesses.
The Staffing Industry is booming, thanks in large measure to the passage of Obamacare. At some point this growth can turn into a poison pill. In 2016 or later, employers will be mandated to provide some coverage to some employees or face heavy fines. At that point healthcare will be a $7 per hour or higher burden. The labor being outsourced is the result of Risk Management by employers, specifically the TRANSFER of risk to the Staffing Industry. Workers's Comp has been the industry's nemesis for decades, if you do not begin planning today a high Experience Modification will be the least of your firm's problems.
If you would like to learn more about the impact of the Affordable Care Act (Good and Bad), please feel free to contact me at any time.
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