Obamacare’s impact on contract security providers
Much has been written about the impact that the Patient Protection and Affordable Care Act, more commonly known as Obamacare, will have on businesses both large and small. President’s Barack Obama’s signature piece of legislation will also undoubtedly have a substantial impact on the security industry, particularly companies that provide guard services. However, there are still a myriad of unanswered questions about how the law will impact individual businesses and there doesn’t seem to be a whole lot of conclusive answers coming in the short term, as there are still number of pending court cases that will have to be resolved before many get the clarity they desire on certain issues.
At the ASIS 2014 conference this week in Atlanta, Eddie Sorrells, chief operating officer and general counsel for DSI Security Services, spoke during an educational session to help provide security providers with some general guidance on the legislation and how it applies to their companies. One of the biggest parts of the law looming for organizations is the employer mandate, which requires that companies with 50 or more full-time employees offer health insurance coverage to their workers and their dependents, excluding spouses.
Earlier this summer, however, federal appeals courts issued conflicting decisions that could impact employers. In Halbig v. Burwell, the D.C. Circuit Court of Appeals ruled that only those people buying insurance plans through the state-run healthcare exchanges are eligible to receive subsidies from the federal government. Contrarily, the 4th Circuit Court of Appeals ruled in King v. Burwell that the IRS did not exceed it authority when the agency issued a rule saying the subsidies applied to the federal healthcare exchange as well.
Despite reports saying that, in effect, the employer mandate was dead as a result of these conflicting rulings, Sorrells said that it is still anybody’s guess as to what the future may hold for the provision as there is still a lot that has to be worked out through the legal system. “All of the people that jumped up and said the employer mandate is over… hold on, wait a minute,” cautioned Sorrells.
According to Sorrells, there are three primary issues that all security companies need to be addressing internally when it comes to preparing for the law’s implementation:
- Does the company have a plan that qualifies as “minimal essential coverage.”
- Does the organization have a plan that the government would deem affordable to employees.
- Which employees in the company are considered “full-time” under the law?
Sorrells explained that the security industry, at least when it comes to guards, has what the IRS refers to variable hours employees, which can be a challenging thing to define for many companies. As a general rule-of-thumb, though, Sorrells said that if an employee is “reasonably expected” to work 30 hours or more a week then they need to be considered full-time workers.
What the government defines as “affordable” health insurance coverage also varies. Under Obamacare, coverage should not cost employees more than 9.56 percent of their household income. Of course, that begs the question of what exactly constitutes an employee’s household income, but because employers cannot ask their workers to turn in a comprehensive list of financial statements, Sorrells said that previously established guidelines in this area have allowed companies to use 9.5 percent of a worker’s W-2 wages to determine whether or not their health plan is affordable. Another “safe harbor” approach would be to see if the level of coverage provided exceeds 9.5 percent of a minimum hourly wage at 30 hours per week. While this may seem unpalatable to some, Sorrells said that “safe harbors are here to make sure you don’t get in trouble.”
Companies that fail to comply with the law face financial penalties, which will vary from company-to-company depending on a variety of factors. As it currently stands, employers that don’t offer “minimal essential” health insurance coverage will be assessed a tax ($2,000 a year) on all full-time employees beyond the 30th employee. Employers that offer health insurance deemed to be unaffordable will be charged $250 a month ($3,000 annually) for any full-time employee who receives a subsidy.
Among some of the emerging strategies from employers for dealing with the ramifications of Obamacare include; directing employees to the exchanges and dropping mini-med/fixed indemnity plans, as well as continuing to offer low-cost alternatives and a compliant 2015 plan.
Another option that some companies have explored is limiting guards to under 30 hours per week, but Sorrells questioned how effective organizations could be in actually implementing those plans. “Can you do that continually and effectively?” he asked. “Can you meet customer expectations?”
For example, Sorrells said that a customer is not going to want to hear that they can’t have a guard at a site because their provider is cutting costs by limiting hours. Additionally, Sorrells said that this approach could end up hurting a company’s employee recruiting and training costs in the long run.
No matter what a company chooses to do, the Affordable Care Act, in one form or another, is going to be in place for the foreseeable future and guard services providers have to be prepared to deal with the impact of the law moving forward.
