Coverage May Be Unaffordable For Low-Wage Workers

WASHINGTON (AP) — It's called the Affordable Care Act, but President Barack Obama's health care law may turn out to be unaffordable for many low-wage workers, including employees at big chain restaurants, retail stores and hotels.

That might seem strange since the law requires medium-sized and large employers to offer "affordable" coverage or face fines.

But what's reasonable? Because of a wrinkle in the law, companies can meet their legal obligations by offering policies that would be too expensive for many low-wage workers. For the employee, it's like a mirage — attractive but out of reach.

The company can get off the hook, say corporate consultants and policy experts, but the employee could still face a federal requirement to get health insurance.

Many are expected to remain uninsured, possibly risking fines. That's due to another provision: the law says workers with an offer of "affordable" workplace coverage aren't entitled to new tax credits for private insurance, which could be a better deal for those on the lower rungs of the middle class.

Some supporters of the law are disappointed. It smacks of today's Catch-22 insurance rules.

"Some people may not gain the benefit of affordable employer coverage," acknowledged Ron Pollack, president of Families USA, a liberal advocacy group leading efforts to get uninsured people signed up for coverage next year.

"It is an imperfection in the new law," Pollack added. "The new law is a big step in the right direction, but it is not perfect, and it will require future improvements."

Andy Stern, former president of the Service Employees International Union, the 2-million-member service-sector labor union, called the provision "an avoidance opportunity" for big business. SEIU provided grass-roots support during Obama's long struggle to push the bill through Congress.

The law is complicated, but essentially companies with 50 or more full-time workers are required to offer coverage that meets certain basic standards and costs no more than 9.5 percent of an employee's income. Failure to do so means fines for the employer. (Full-time work is defined as 30 or more hours a week, on average.)

But do the math from the worker's side: For an employee making $21,000 a year, 9.5 percent of their income could mean premiums as high as $1,995 and the insurance would still be considered affordable.

Even a premium of $1,000 — close to the current average for employee-only coverage — could be unaffordable for someone stretching earnings in the low $20,000's.

With such a small income, "there is just not any left over for health insurance," said Shannon Demaree, head of actuarial services for the Lockton Benefit Group. "What the government is requiring employers to do isn't really something their low-paid employees want."

Based in Kansas City, Mo., Lockton is an insurance broker and benefits consultant that caters to many medium-sized businesses affected by the health care law. Actuaries like Demaree specialize in cost estimates.

Another thing to keep in mind: premiums wouldn't be the only expense for employees. For a basic plan, they could also face an annual deductible amounting to $3,000 or so, before insurance starts paying.

"If you make $20,000, are you really going to buy that?" asked Tracy Watts, health care reform leader at Mercer, a major benefits consulting firm.

And low-wage workers making more than about $15,900 won't be eligible for the law's Medicaid expansion, shutting down another possibility for getting covered.

It's not exactly the picture the administration has painted. The president portrays his health care law as economic relief for struggling workers.

"Let's make sure that everybody who is out there working hard and doing the right thing, that they're not going to go bankrupt because they get sick, that they're going to have health care they can count on," Obama said in a Chicago appearance last summer during the presidential campaign. "And we got that done."

White House senior communications advisor Tara McGuinness downplayed concerns. "There has been a lot of conjecture about what people might do or could do, but this hasn't actually happened yet," she said. "The gap between sky-is-falling predictions about the health law and what is happening is very wide."

The administration believes "most businesses want to do right by their employees and will continue to use tax breaks to provide quality coverage to their workers," she added. Health insurance is tax deductible for employers, and the health law provides additional tax breaks to help small businesses.

Virtually all major employers currently offer health insurance, although skimpy policies offered to many low-wage workers may not meet the requirements of the new law. Companies affected have been reluctant to telegraph how they plan to comply.

"It clearly isn't going to be a morale-boosting moment when you redo your health plan to discourage participation," said Stern, the former labor leader, now a senior fellow at Columbia University. "It's not something most want to advertise until they are sure it's the right decision."

The National Retail Federation's top health care expert said there's no "grand scheme to avoid responsibility" among employers. "That is a little too Machiavellian," said Neil Trautwein.

Nonetheless, he acknowledged it's "a possible outcome" that low-wage workers could find coverage unaffordable because of the wrinkle in the law.

It might have turned out differently, added Trautwein, if Democrats had followed traditional congressional practice and taken the House and Senate versions of the bill to a conference committee. They could have worked out such quirks. But leaders determined that path was fraught with political peril after Democrats lost their 60-vote Senate majority in 2010.

"I can't help but thinking, they would have figured out a few more of these corners that don't meet," Trautwein said.

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Health Perks Geared To Top Workers Could Trigger Penalties Under Health Law

Many executives have long enjoyed perks like free health care and better health benefits for themselves and their families. But under a little noticed anti-discrimination provision in the federal health law, such advantages could soon trigger fines of up to $500,000.

Employers “should be more concerned about this than anything else” in the law, because many are in violation and the penalties can be stiff, says Jay Starkman, chief executive of Engage PEO in St. Petersburg, Fla., which offers human resources services and advises clients on the health law.

The provision says that employers who offer more generous benefits to highly paid workers could face fines of $100 a day for every worker who doesn’t get the perks, up to $500,000.

It applies to employers who buy benefit packages for their firms from insurers. Those who self-fund their coverage, who tend to be larger firms, already face similar restrictions under Internal Revenue Service rules which pre-date the law.

To make sure his own small company complies with the law, Starkman began paying $600 in premiums toward his family’s coverage last month, putting him on an even playing field with his 60 employees.

He says the rule makes sense, noting that executives are likely to get little sympathy from the public.

“The right way to handle it is to have the same benefits for everyone,” he says, noting that firms can increase wages to managers or executives to cover their additional costs.

But business owner Steve Diddams worries that complying with the provision could erase his profits.

Diddams, owner of seven Diddams Party & Toy retail stores in California, has about 100 employees, most of whom are paid hourly and who don’t get health insurance.  But because he offers about 20 managerial workers HMO coverage, he might fall afoul of the discrimination rule. He could also be subject to a $2,000 per worker penalty for not offering coverage to his hourly employees, although lawyers say they’re not sure he would face fines for both.

Raising his prices to cover the cost of expanded health coverage really isn’t an option. “Our customers are moms with kids, and it comes to a point where they are not going to pay $2 for a balloon,” Diddams says.

The anti-discrimination provision is technically in effect now, but the IRS says it will not impose penalties until it completes regulations and issues guidance about how the provision will be enforced. 

Employers are likely to have until 2015 to figure out whether they comply, says Terry Dailey, a partner at Mercer, a benefit consulting firm.

The IRS rule offers guidelines explaining who is a highly paid employee, and says a plan discriminates if it favors such workers in terms of eligibility or benefits.

There are differences between the IRS rule and the federal health law provision. For example, if a self-insured firm is found to violate the IRS rule, the employees getting more generous benefits could end up paying taxes on their value. In contrast, the federal health law imposes fines on the employer, most of whom are expected to be small and mid-sized firms.

Congress likely saw the provision as “an additional deterrent to [employers] picking and choosing” who gets health coverage,” says attorney Timothy Tornga, of Mika Meyers Beckett & Jones in Grand Rapids, Mich., who advises employers.

Those penalties “fall especially hard on the small business population,” and may encourage some small firms to switch to self-funding their medical coverage, says the Small Business Coalition for Affordable Healthcare, which represents firms involved in agriculture, food service and retail, in comments submitted to the IRS.

In seeking comments, the IRS asked employers and others how to define “benefits.” Do they include, for example, not just the coverage provided, but how much employees pay toward those costs? Some firms, for example, charge executives less than other employees – or nothing at all – toward coverage. Would that count as being discriminatory?

Some groups don’t think so, and are urging the IRS to exclude the employee contributions from its calculations. Benefits are “limited to only those goods and services that are payable by the plan,” says the American Benefits Council, a trade association for employers.

The U.S. Chamber of Commerce, saying the older IRS rules that the federal law builds upon are unclear, rarely enforced and “unworkable,” wants the agency to replace them entirely rather than issuing rules “similar” to them.

Mercer’s Dailey says there are no good national statistics on how many employer plans might be considered discriminatory under the law.

Any fully insured plan that existed before the health law, and which has not been significantly changed is “grandfathered” and therefore exempt.

“We don’t see … [discriminatory policies] every day, but it’s not infrequent,” he says. “There will be many employers who will need to look at their plan designs and potentially make changes.

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Health Law Could Boost Use Of Temp Workers

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Health law could boost use of temp workers By Jay Hancock, Mar 25, 2013 10:40 PM EDT

The Washington Post

The health-care law could prove to be a boon for temporary-staffing companies as employers outsource jobs to sidestep complex requirements for medical insurance.

But some experts say the Affordable Care Act’s exceptions for temporary employees could undercut the goal of expanding coverage to more American workers.

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“That could lead to an increase in part-time workers” who lack insurance, said Susan N. Houseman, an economist at the Upjohn Institute for Employment Research who studies staffing companies. “You regulate something and people will always try to find a way around the regulation.”

Starting in January, employers with at least 50 workers must offer affordable coverage or pay a penalty. To stay under this limit, some are considering outsourcing jobs to specialists such as Kelly Services, Manpower, Robert Half and Randstad, whose stock prices have soared.

“We are already getting inquiries from our client base for companies in and around 50 [employees], asking us to help them understand this legislation, and to inquire as to how we might be helpful,” M. Keith Waddell, Robert Half’s president, told investors on a conference call a few weeks ago. “Our response is that we can legally help them remain under 50.”

The health law is also prompting larger organizations to use temp agencies. By requiring employer coverage only for those who put in at least 30 hours a week, the act appears to create an incentive for companies to do less with permanent workers and more with part-timers, which are the main focus of staffing agencies.

Manpower is talking to clients about “a more flexible labor model,” where workers “might be working 29 hours a week,” company chief executive Jeffrey A. Joerres told investors in January, adding, “We definitely look at it as a positive.”

School administrators in Dothan, Ala., decided to hire substitute teachers through Kelly Services to avoid possible health-cost obligations if they were to employ them directly.

Dothan subs don’t get medical coverage now, and the district pays about $700 per month for the full-time teachers who do. “You multiply that times 300 [substitutes] and you’ve got a big expense,” said Dell Goodwin, personnel director for Dothan City Schools.

Little-known, complex rules developed by the Internal Revenue Service could also allow some full-time jobs placed through temp agencies to come without health benefits.

Manpower, Robert Half and other staffing specialists are giant companies, with far more than 50 employees. So they are subject to the same health act requirements as other companies to offer coverage to full-timers.

But in regulations issued last year, the IRS left an opening for employers of “variable-hour” labor such as temp agencies. If it’s not clear upon hiring that an employee will consistently work more than 30 hours weekly, companies get up to 12 months to determine whether the person is full time and qualifies for health benefits — even if the employee does end up working full time. Few temps last 12 months.

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Agribusiness Pushes To Lower Farm Workers’ Wages May Undermine Deal On Immigration Reform

As lawmakers prepare to release legislative language for proposals that would allow an estimated 11.2 million undocumented immigrants to earn a path to citizenship, a small bipartisan group of senators is struggling to reach a deal for how to create a steady supply of labor for farmers and growers, threatening to undermine the newfound momentum for comprehensive reform.

Lawmakers agree that the roughly 1 million individuals currently working without legal status in the agricultural industry are essential to maintaining America’s food supply and should be able to achieve legal status through an expedited legalization process. But the parties remain deeply divided over how to treat future flows of farm workers. Four senators — Dianne Feinstein (D-CA), Orrin Hatch (R-UT), Marco Rubio (R-FL), and Michael Bennet (D-CO) — are currently involved in tense negotiations between growers and advocates for farm workers, represented by United Farm Workers of America. The talks, which hinge on the wages workers should earn and the number of new visas that should be issued, are close to a standstill, sources involved in the negotiations tell ThinkProgress, as the growers refuse to make concessions and are insisting on paying future farm workers less than they are earning now.

Under current law, growers can legally bring foreign agricultural workers into the United States under the H-2A visa program after making an active effort to recruit U.S. workers in areas of expected labor supply. Employers must pay the higher of the state or federal minimum wage, a local prevailing wage rate or the adverse effect wage rate (AEWR), a Reagan era formula based on the USDA Farm Labor Survey of the average wages of nonsupervisory field and livestock workers. Growers who import labor are prohibited from paying their agricultural workers less than the average of the wages in their region and are exempt from paying Social Security and Medicare taxes on H-2A compensation. As a result, foreign workers cost growers an average of 11 percent less than American workers.

Lax enforcement of H-2A standards, however, has allowed growers to routinely circumvent protections, including advertising requirements and the hiring of illegal international recruiters to import even cheaper labor from Mexico. Workers on H-2A visas, advocates say, are abused by employers, cheated out of pay, and lack basic labor protections like occupational safety standards. Farm workers are paid some of the lowest wages in the country and are more likely to live in poverty and lack basic access to health care than salary employees.

Groups representing farm workers argue that the H-2A system is rifle with abuse, while growers complain that red tape, mass delays, and overregulation serve as barriers to importing needed labor. Both sides have now agreed to establish a new visa program outside of the H-2A structure that would be included in a broader immigration reform deal — but are very far apart in the details of that plan.

Individuals involved in the negotiations say that growers are demanding wage standards that would amount to a significant reduction from the current AEWR formula, allowing employers to import cheap foreign labor while significantly undercutting American workers and lowering the earning potential of future streams of workers. Growers, whose opening offer would have paid workers just 10 percent above the federal minimum wage, have proposed numerous pay formulas, one person directly involved in the negotiations told ThinkProgress, but appear uninterested in compromising with labor groups. Kristi Boswell, Director of Congressional Relations at the American Farm Bureau — the organization representing growers — pushed back against that formulation, saying that while the discussions are “ongoing,” the growers’ proposals would “increase wages” for farmers and would better represent market conditions. The current AEWR average is $10.80, while grower proposals would pay workers less than $8.

“It must take incredible willpower for growers to utter the words ‘farmworkers are overpaid’ with a straight face,” Marshall Fitz, Director of Immigration Policy at the Center for American Progress, said. Farm workers “are the most difficult and physically demanding jobs in America and are performed by workers making barely above the minimum wage.”

A policy analyst close to the negotiations told ThinkProgress that growers may be refusing to give ground during Senate negotiations in hopes of securing a more favorable agreement in Republican-controlled House. But GOP senators taking part in the talks are growing frustrated, and immigration reform advocates fear that without a clear deal governing future flows of immigrants, comprehensive reform may be in trouble.

“Agribusiness lobby power has kept farm workers excluded from every major labor law for decades,” said Maria Machuca, spokeswoman for the Keene, California-based UFW, in an e-mail. “It would be a grievous mistake to allow agribusiness to use the debate over immigration reform to further reduce wages of the poorest workers in the country.”

View the original article here

Health Law Could Boost Use Of Temp Workers

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Health law could boost use of temp workers By Jay Hancock, Mar 25, 2013 10:40 PM EDT

The Washington Post

The health-care law could prove to be a boon for temporary-staffing companies as employers outsource jobs to sidestep complex requirements for medical insurance.

But some experts say the Affordable Care Act’s exceptions for temporary employees could undercut the goal of expanding coverage to more American workers.

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“That could lead to an increase in part-time workers” who lack insurance, said Susan N. Houseman, an economist at the Upjohn Institute for Employment Research who studies staffing companies. “You regulate something and people will always try to find a way around the regulation.”

Starting in January, employers with at least 50 workers must offer affordable coverage or pay a penalty. To stay under this limit, some are considering outsourcing jobs to specialists such as Kelly Services, Manpower, Robert Half and Randstad, whose stock prices have soared.

“We are already getting inquiries from our client base for companies in and around 50 [employees], asking us to help them understand this legislation, and to inquire as to how we might be helpful,” M. Keith Waddell, Robert Half’s president, told investors on a conference call a few weeks ago. “Our response is that we can legally help them remain under 50.”

The health law is also prompting larger organizations to use temp agencies. By requiring employer coverage only for those who put in at least 30 hours a week, the act appears to create an incentive for companies to do less with permanent workers and more with part-timers, which are the main focus of staffing agencies.

Manpower is talking to clients about “a more flexible labor model,” where workers “might be working 29 hours a week,” company chief executive Jeffrey A. Joerres told investors in January, adding, “We definitely look at it as a positive.”

School administrators in Dothan, Ala., decided to hire substitute teachers through Kelly Services to avoid possible health-cost obligations if they were to employ them directly.

Dothan subs don’t get medical coverage now, and the district pays about $700 per month for the full-time teachers who do. “You multiply that times 300 [substitutes] and you’ve got a big expense,” said Dell Goodwin, personnel director for Dothan City Schools.

Little-known, complex rules developed by the Internal Revenue Service could also allow some full-time jobs placed through temp agencies to come without health benefits.

Manpower, Robert Half and other staffing specialists are giant companies, with far more than 50 employees. So they are subject to the same health act requirements as other companies to offer coverage to full-timers.

But in regulations issued last year, the IRS left an opening for employers of “variable-hour” labor such as temp agencies. If it’s not clear upon hiring that an employee will consistently work more than 30 hours weekly, companies get up to 12 months to determine whether the person is full time and qualifies for health benefits — even if the employee does end up working full time. Few temps last 12 months.

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