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Affordable Care Act, Contract Employees and Large Employers

Recently, there has been a thought process on the Affordable Care Act (ACA) that large employers (50+ full-time employees) would be able to shift health coverage costs to the government by sending their employees to a health insurance exchange by paying a tax-free contribution to help pay for premiums. However, in a recent change in law, the Obama administration has eliminated this possibility with a new ruling that doing this is unlawful and does not satisfy the ACA law and employers that try to go this route could be subject to a tax penalty of up to $100 per day, per employee that uses the healthcare exchange.

Under the ACA, insurers are unable to impose annual dollar amount limits on benefits for any individual, and they must provide certain preventive services, like mammograms and colon cancer screenings, without co-payments or other charges.

This particular change in the ACA is meant to strongly deter large companies from giving workers a tax-free stipend to use for health insurance purchase in the exchange. The IRS has stated that doing this in 2015, when the employer mandate will be enforced, will not satisfy the requirements of the ACA, as a result, the company would be fined for failure to comply.

An alternative to paying hefty healthcare charges, or government imposed fees and fines would be to consider using contract staffing to maintain a labor force of fewer than 50 full-time employees. Contract staffing has surged since the recent recession and is continuing to see growth as more and more businesses are using contractors in a blended workforce model that is a direct result of business strategy.

Businesses maintain a small core group of traditional employees, those who are key personnel and have necessary experience, longevity, drive and stability to continue the growth of the company. In addition to this core, contractors are used to help with the day-to-day responsibilities and tasks that are critical to projects.

An example of this workforce marriage would be an accounting firm hiring contractors during tax season, a manufacturing plant hiring engineering contractors during the launch of a new project or plant contractors during an upswing in production.

Contractors can be used for longer term needs to take some pressure off of HR when hiring demands or training demands are high, as well as in floater positions to fill in for various departments as needs arise.

As the Affordable Care Act continues to evolve, so too will the solutions to carrying the hefty financial burdens that are sure to come with it.