ACA (aka Obamacare) continues to be the topic du jour in most hotel and restaurant management companies. Given all of the problems that ACA continues to experience with its website roll out to date, and the premium shock many individual plan buyers are receiving over the healthcare insurance exchanges in the last couple of months; many hotel and restaurant managers and owners are extremely worried about the havoc that the federally mandated regulation of employer plans beginning in December 2014 may have on their operations.
The “Employer Mandate” is one such policy, which could change the structure of the American workforce if ACA is not soon amended by Congress. Essentially, the Employer Mandate will require employers with 50 or more full time equivalent employees to provide “Affordable Healthcare” to all employees who work 30 or more hours a week. The implementation was delayed a year in order to give the employers, insurance companies and the regulators time to work out the details, but will go into effect late next year.
Beginning in 2015, all plans will have to fully comply with ACA guidelines. The market and the public will not likely fully grasp the premium increases this will require until next summer when more insurance companies publish their ACA compliant plans and rates. Based on some of the early plans that have been published, there is little doubt that premiums will increase dramatically for healthy employees. In an effort to control costs, many employers will pass most of the costs on to employees. Employers who can reduce their fulltime equivalent to less than 50 and avoid the Employer Mandate are already making the change.
There has been much press of late reporting on employers already increasing the number of part time employees in order to get under this 30 hour requirement. The impact this is having on the workforce is unclear. So far, this trend is mostly anecdotal with no statistical evidence that complying with ACA is driving the growth in part time employment we have seen over the last couple of years in the workforce. However, it is very likely that the trend of part time employment will accelerate further next year; and we will begin to see statistical evidence that will support the structural change from a focus on full time to a part time workforce in the United States.
However, adjusting the hours of employees can be complicated. This is best supported by an example in the hospitality industry. This is a real life situation in Phoenix, Arizona that I recently encountered. A small fast foods store owner/operator has four stores, each is owned in a separate LLC with on average 20 employees per store. Ten are full time employees and ten are part time working approximately 25 hours a week. Of the ten full time employees, four are salaried and have health insurance. Six are hourly employees, and even with the employer paying 60% of the premiums, they cannot afford the insurance and none avail themselves of it.
he four stores must be consolidated as if one entity under ACA regulations, which means the owner, has 40 full time and 40 part time employees. It appears he is under the requirement of 50 full time employees; unfortunately first impressions are not always correct. The 40 part time employees each work 100 hours a month. Under ACA regulations the total of 4,000 hours a month is divided by 120 hours (30 hour per week) to yields 33 full time equivalent employees. For purposes of the Employer Mandate, this employer has 73 full time equivalent employees and must provide insurance for the 24 full time hourly employees (6 per store) not currently covered. The penalties for the employer can be quite severe for not complying.
In order to avoid the penalties, this owner/operator will need to reduce the 24 full time hourly employees to less than 30 hours a week. This means he will have to hire additional part time employees to cover the working hours of the stores. He will need to add three to four part time employees per store. In summary, instead of 40 full time employees and 40 part time employees, he would have 16 full time employees and 76 part time employees.
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