What to tell clients regarding your healthcare plans
In January 2015, the Affordable Care Act’s “pay or play” employer mandate became effective for large employers, requiring them to offer their full-time (or full-time equivalent) employees health insurance coverage that meets federally established guidelines or pay a penalty. Despite guidance provided by the IRS, confusion persists regarding how to comply with the law’s requirements. In fact, such guidance provided by the IRS in its final rule under Section4980H of the Internal Revenue Code further complicates the issue and raises concerns regarding staffing firms’ potential exposure to liability for failure to comply with other federal laws.
Offer of Coverage. Section 4980Hand the related IRS “offer of coverage” provision could encourage client companies to demonstrate they are paying more for workers who are receiving benefits coverage than those workers who are not. Not surprisingly, these provisions could prompt a client company to request a staffing firm provide an accounting of the additional fees charged for the staffing firm’s healthcare plan on a temp-by-emphasis.
These requests could likely lead a staffing firm to consider what information it ought to provide to clients regarding its healthcare plans. Not only are there legal considerations, but there are practical concerns as well.
ERISA concerns. The Employee Retirement Income Security Act (ERISA) prohibits adverse action against plan participants for exercising or attempting to exercise their rights under ERIS or ERISA plans. With that in mind, providing the identities of individual workers enrolled in a staffing firm’s healthcare plans to client companies could create an issue for the client underarms. If a temporary worker’s assignment is terminated by the client after being identified as a healthcare plan participant, the worker could claim the termination was motivated by his or her participation in the ERISA protected healthcare plan, which could lead to discrimination or retaliation claim.
Due to the potential employment-related risks associated with disclosing certain types of benefits information to clients (e.g., the identity of enrolled employees), in consultation with legal counsel, staffing firms should carefully consider what information may be provided.
Practical concerns. Even if the ERISA issues could be overcome, there is also the very practical concern of how to administrate the accounting of healthcare fees that client companies may request. The very nature of the staffing industry makes it entirely foreseeable (and highly likely) that a temporary worker who is enrolled in benefits will be dispatched to multiple client companies in a calendar year. Given that the worker may only become eligible, and therefore enrol, in benefits during their second or third assignment for that year, it is not only impractical, but also nearly impossible to supply client companies with a fair and equitable allocation of costs specific to just the one client currently making the accounting request.
Note that a patrolling relationship may run contrary to this argument because a pay rolling provider is not likely to employ the same payrolled employee at multiple different client companies. This makes a reasonable accounting of healthcare fees more achievable in a pay rolling context.
Best practices. Like many other elements of the ACA, Section 4980H’srelated offer of coverage provision seems difficult to understand, not well settled and challenging to implement. The best practice for a staffing firm responding to a client request for information about the staffing firm’s healthcare fees is twofold: 1. consult with legal counsel and develop a compliant approach that covers non-discrimination concerns, and 2. work with client companies to establish a solution that is practical and compliant from an employment law perspective.
This article should not be interpreted as legal advice. Please consult with qualified legal counsel.
