Ever since the comprehensive health care reform, the Affordable Care Act (ACA, aka Obamacare) was introduced in March 2010, temp agencies have stepped up their efforts in offering temporary employees health insurance and welfare plans.
The nascent gig economy is constantly reinventing the employment market and its associated benefits; this includes health insurance coverage. With more and more employers looking to hire freelance or temporary employees to reduce costs, taking individual responsibility in regards to your own health insurance is becoming more important than ever.
Before we discuss the conditions under which temp agencies offer health insurance, let’s take a look at what the ACA actually is and why it was signed into law.
What is the Affordable Care Act (ACA)?
In March 2010, the Affordable Care Act was signed into law as a federal statute by the Obama administration, as part of wider health care reform. The new law, signed under the Patient Protection and Affordable Care Act (PPACA), established health insurance exchanges, expanded Medicaid eligibility, and banned health insurers from denying coverage because of pre-existing illnesses or conditions.
Why was the ACA introduced?
When the ACA legislation was passed, the aim of the Congressional Budget Office was to reduce the federal deficit by nearly $145 billion in the first 10 years, and between 0.25% and 0.5% of GDP following that.
Government data suggests that over 20 million Americans benefit from insurance coverage under this law– but the costs of the new amendments are offset by higher taxes on items and services such as eyeglasses, hearing aids, and indoor tanning.
Monetary penalties for temp agencies
For a long time, independent contractors traditionally leased employees; this proved to be cost-effective for staffing firms since part-time employees were not offered health and welfare benefit plans. After the ACA, however, employers risk a monetary penalty if they continue this practice. Under Internal Revenue Code Section 4980H(a), any employers with 50 or more Full-Time Equivalent Employees (FTEs) must provide health insurance to at least 95 percent of their employees.
Employers are not directly obligated to provide coverage to their employees, but if any of its full-time employees without employer-provided coverage purchases coverage from an exchange and receives premium assistance, the annual 4980H(a) penalty can be very severe. $2,000 is fined for every full-time employee the company has (even those with employer-provided coverage), minus the first 30 full-time employees.
Since the 4980H(a) penalty applies only with respect to full-time employees, temp agencies could in effect avoid providing health insurance by limiting the hours of certain workers to less than 30 hours per week (130 hours per month). Although this strategy could help employers avoid penalties, part-time employees still count toward determining whether the employer meets the 50-employee threshold for identification as a “large” employer; therefore, the employer can still be fined should an uncovered employee need premium medical assistance.
Health insurance for temp employees
Under the ACA, temporary employees that belong to a temp agency of at least 50 employees need to be offered some form of health coverage. If there are less than 50 employees and the temp agency does not choose to offer health insurance, the onus is on the temporary employee to comply with PPACA’s individual mandate.
Employers that classify themselves as temp agencies or staffing firms, but do not engage or contract with a third party to provide employees with health insurance, will find their actions scrutinized by their state wage and hour/labor enforcement divisions as well as by the US Department of Labor.
The ACA under President Trump
One of President Donald Trump’s central campaign promises has been to roll back the ACA to reduce the fiscal burden on the government. In his first executive order on January 20, 2017, Trump signaled the first phase of Republican efforts to repeal and replace the ACA.
Although attempts by the government in 2017 to repeal the law altogether were not successful, Congress removed the penalty for not having health insurance– a mandate that many Republicans had opposed. The government also scaled back its outreach program substantially and cut the enrollment period in half.
In early 2018, President Trump issued new rules to make it easier for citizens to buy cheaper insurance, but with less health care sector coverage.
In March 2019, the Trump administration broadcasted that it will seek to repeal the ACA after The Justice Department agreed with a Texan judge in a federal appeals court that the health care law is unconstitutional. The case is expected to go to the Supreme Court with a coalition of 21 attorneys general defending the ACA.
Receiving health insurance from a temp agency
Before you sign to a temp agency, it is vital to check the details of your compensation package, including the extent to which health insurance costs are contributed. Some companies may not contribute to benefits at all, only offering a group plan that employees can purchase for themselves. Based on the size of the temp agency, the contribution amounts may vary.
With no legal requirements, health insurance plans on temp contracts are usually of the short-term variety, covering a period of up to 12 months and non-renewable. Therefore, if you find yourself employed by a temp agency for more than a year, you should consider an individual health plan to carry you through.
The latest ACA reforms will result in more temporary employees, as large companies with over 50 employees will attempt to hire more part-time workers to avoid healthcare contributions. As a result, individual insurance plans will be on the rise.
Individual health insurance is designed for people that find themselves in this predicament, and there are many options to choose from. You may even find that some save you money while offering certain benefits that are tailored to your individual needs. As is often the case, plans bought on an individual basis work out to be cheaper than if your employer offered you coverage. Prices vary according to the state, the insurer and other factors pertaining to your personal health.
Here at Innovo Staffing, we comply with all state and federal laws governing workers’ compensation and disability for your benefit and peace of mind. We’re a full-service employment agency located in New York, New Jersey, and Philadelphia, and specialize in pairing interim, direct-hire, and consulting professionals in financing and accounting industries.
Would you like to find out more about our services and health insurance policy? We’d be more than happy to answer your questions. Just fill in our online contact form and we’ll get back to you as soon as possible.