Employer Mandate & Staffing Company Coverage

[Flyboyjohn]

Final regulations allow the common law large employer to take credit for health coverage provided by a staffing company or PEO but only if the staffing company charges a higher fee for workers for whom it's providing coverage.

Does the higher fee have to be charged with respect to all workers OFFERED ACA compliant coverage or only those who actually ENROLL in the coverage?

It would seem logical that the fee should attach to any worker offered coverage since that dovetails with the common law employer's obligation but the reg language seems to say the fee applies with respect to the workers "actually provided" coverage.

[GBurns]

I do not recall seeing that in the Regs and I am sure that the suggestion that the PEO could provide health coverage would have jumped out at me. Can you give a cite?

[Flyboyjohn]

See 54.4980H-4(b)(2), a lengthy paragraph titled "Offer of coverage on behalf of another entity", page 213 of the PDF version of the regs from the Federal Register, thanks

[KJohnson]

I think it is enrollment and I think to take advantage of the offer the PEO has to have two rates--one for employees that enroll in the offered coverage and one for those that do not.

Here is the condition from the regulations "only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay the staffing firm for the same employee if that employee did not enroll in health coverage under the plan."

[Flyboyjohn]

I agree with your interpretation but consider the following hypothetical:

I'm a staffing firm with 2 workers, Joe and Jim, and I offer both of them adequate and affordable ACA compliant coverage.

Joe takes the coverage, costs me $1/hour and I pass that on to my client company. Jim doesn't take the coverage, doesn't carry the extra $1/hour charge but my client still gets to take credit for my offer of coverage.

What prevents my client from saying "Only send me the folks who didn't take the coverage and therefore cost $1/hour less"?

[GBurns]

That is why you have to make the distinction between a staffing firm and a PEO and never conflate the two.

[Flyboyjohn]

Are you suggesting that a staffing company cannot have workers that are actually the common law employees of the client company?

The regs suggest this is the "typical" situation.

[KJohnson]

In the preamble and Treasury sure seems to "conflate the two."

Under this same reasoning, if certain conditions are met, an offer of coverage to an employee performing services for an employer that is a client of a professional employer organization or other staffing firm (in the typical case in which the professional employer organization or staffing firm is not the common law employer of the individual) (referred to in this section IX.B of the preamble as a ‘‘staffing firm’’) made by the staffing firm on behalf of the client employer under a plan established or maintained by the staffing firm, is treated as an offer of coverage made by the client employer for purposes of section 4980H. For this purpose, an offer of coverage is treated as made on behalf of a client employer only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay to the staffing firm for the same employee if the employee did not enroll in health coverage under the plan.