Filed Under:Markets, Employee Benefits

Union: Employers can abuse full-time worker safe harbor

Treasury Secretary Timothy Geithner (AP Photos)
Treasury Secretary Timothy Geithner (AP Photos)

Some commenters say the Employee Benefits Security Administrator (EBSA) has poked a hole in the Patient Protection and Affordable Care Act (PPACA) employer health coverage mandate provisions.

Carol Golubock and Amy Adams of the Service Employees International Union (SEIU) said parts of guidance that EBSA and other federal agencies posted earlier this year would give an employer too much discretion over the time it takes to measure whether a worker is a full-time employee and too much flexibility when classifying workers as "variable hour" or "seasonal" employees.

"Treasury has created a system highly vulnerable to abuse," the SEIU reps wrote. "Employers will have an incentive to apply the variable hour classification in an overly broad manner to extend the period during which they are not responsible for contributing to their employers' healthcare coverage."

Employers in states in which workers work "at will" "may also simply fire new 'variable hour' employees who worked full-time during their initial measurement period and then immediately rehire them, classifying them as 'new employees' and beginning the initial measurement period again," the reps wrote. "We have already received anecdotal reports of employers discussing this strategy."

Ken Jacobs and Laurel Lucia, faculty members at a University of California at Berkeley labor research center, also wrote that the current safe harbor would give an employer an incentive to lay off variable-hour workers and then rehire the workers.

"In order to prevent this type of evasion, the term 'new employee' should be defined to exclude employees who had a short break in service or who worked at the same worksite under employment through a temporary staffing agency prior to being hired directly," Jacobs and Lucia wrote.

The commenters are some of the 44 individuals and groups that have weighed in on Technical Release Number 2012-02, a document in which the agencies talked about how they may apply some of the sections of PPACA that apply to employers.

PPACA does not require employers to provide coverage, but it does require employers with 50 or more full-time employees that fail to provide health benefits to pay a penalty.

Employers that do offer health coverage will have to limit any waiting periods that occur before coverage begins to 90 or fewer days.

In Technical Release 2012-02, officials gave temporary advice on how employers and their advisors should define terms such as "90 days," how to determine whether a worker is a full-time worker, and how to apply the rules to workers who are already on the payroll.

If an employer provides benefits only for workers who work a certain number of hours, and if the employer cannot reasonably expect a new worker to work enough hours to qualify for coverage, then "the plan may take a reasonable period of time to determine whether the employee meets the plan’s eligibility condition," officials said in the release.

An employer could have almost 14 months from a variable-hour worker's start date to make coverage effective, officials said.

Comments on the guidance were due Sept. 30.

Many of the commenters submitted relatively brief comments that dealt mainly with narrow issues.

Daniel Durham and Thomas Wilder wrote on behalf of America's Health Insurance Plans (AHIP) that health plans would like to see federal agencies give health insurers the right to rely on a plan sponsor's determination of when an individual has become eligible for coverage and whether the individual is still in a waiting period.

"The insurer has no specific knowledge of the plan sponsor's policies and procedures," Durham and Wilder wrote.

Helen Darling of the National Business Group on Health (NBGH) has asked officials to give employers up to 12 months to determine whether both ongoing and new employees are full-time workers and to keep those employees' coverage arrangements stable for up to 1 year at a time.

Darling also asked officials to go easy on employers that make mistakes.

"It is highly likely, particularly in the first years of implementation, that plans and their third-party administrators may make inadvertent errors in determining full-time status and enrolling employees based on such determinations," Darling said. "Therefore, we recommend that the Agencies allow a safe harbor for de minimis errors under which employers will not be subject to employer responsibility payments, provided employers make reasonable, good faith efforts to comply and correct such errors within a reasonable period after discovering the errors."

Representatives from some labor groups also made relatively narrow suggestions.

Arthur Dreschsler of the Equity-League Health Fund suggested, for example, that federal agencies should exclude unionized workers covered by collective bargaining agreements when determining how many full-time workers and employer has.

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