In Room 408B of the Los AngeLes
Convention Center, in-house lawyer
Ron Peppe had a secret to share about
Affordable Care Act compliance: Utah.
Under the law’s “employer mandate,” businesses must make insurance
that covers “essential health benefits”
available to their full-time employees
at a reasonable price by January 2015 or
risk fines. But states may specify what
they consider vital. And employers can
pick any state they wish to follow, even
if they don’t do business there.
To Peppe, that spells the Beehive
State, which he says requires relatively
inexpensive essential health benefits.
Utah, for example, doesn’t require
infertility treatments or hearing aids,
he noted. “You’ll look like a genius” to
your chief financial officers, he said.
That’s not the only way to rein in the
costs of implementing the new federal
health care act, lawyers at the Association of Corporate Counsel’s annual
meeting in Los Angeles learned in October. “Managing hours”—or reducing
the number of hours employees work
per week to less than 30—was another
option, said Penny Wofford, of Ogle-tree, Deakins, Nash, Smoak & Stewart.
If a company has 50 full-time
employees—including full-time equivalent workers—who work more than 30
hours per week, it must offer those individuals health insurance under the law.
Cutting hours to reduce expenses
worries labor groups. In a letter this
summer to Senate Majority Leader
Harry Reid, D-Nev., and House Minor-
ity Leader Nancy Pelosi, D-Calif., the
International Brotherhood of Teamsters,
United Food and Commercial Workers
International Union and Unite Here
urged removal of that “incentive.”
“Numerous employers have begun
to cut workers’ hours to avoid this obli-
gation, and many of them are doing so
openly,” they wrote. “The impact is two-
fold: fewer hours means less pay while
also losing our current health benefits.”
Although an uptick in part-time
employment was under way before
Congress passed the ACA in 2010, the
Employee Benefit Research Institute
reports that employers are citing the law
as a reason for reducing workers’ hours.
More than 350 employers have done
that or taken related actions, according
to Investor’s Business Daily, which is
tracking the trend. Of those employers, more than 75 percent were public
entities, including school districts and
county governments. Companies such
as Lands’ End Inc., Regal Entertainment
Group and SeaWorld Entertainment
Inc. also made the list.
Wofford, who focuses on employment litigation and employee benefits
at her firm’s office in Greenville, S.C.,
predicts litigation. “Plaintiffs attorneys
… are very interested in exploring this
theory of whether you can reduce someone’s hours in order to avoid providing
coverage or to avoid a penalty under
the Affordable Care Act,” she says.
Sanford Heisler chairman David
Sanford, who represents employees in
labor disputes, agreed that employers
that cut workers’ hours to circumvent
the mandate may face lawsuits. “We
certainly would be interested in exploring if there would be a claim,” says Sanford, who is based in Washington, D.C.
If a business doesn’t offer insurance
to its full-time employees, it faces a
“sledgehammer” fine of $2,000 multi-
plied by its number of full-time workers,
Wofford notes. And for each full-time
employee forced to acquire subsidized
insurance through an ACA exchange
because their company’s health plan
is too expensive, the business faces a
$3,000 fine for failure to offer affordable
coverage, she says.
The money spent on fines still could
prove cheaper for companies than providing health insurance to their employees, Peppe observes. Canam Steel Corp.,
where he is vice president for legal and
human resources, could save $2 million
per year by opting out of the ACA and
accepting the penalties, he says.
“We decided we weren’t going to go
that route, even though theoretically
we could come out ahead monetarily,
because there’s the issue of being competitive and hiring people,” Peppe
says. “So, we’re back to what we do in
the [human resources] side of things of
making sure we can attract and recruit
and retain the people that we want. And
frankly, with the economy improving …
health care is still a pretty core benefit.”
WRESTLING WITH OBAMACARE
At a gathering of lawyers from around the country, talk about ways to rein in costs.
Ron peppe (Left) of CAnAm
steeL shARed stRAtegIes
wIth LAwyeRs At the ACC
ConfeRenCe In oCtoBeR.
dAVId sAnfoRd (Bottom
Left) tALked ABout possIBLe empLoyee LAwsuIts,
And penny woffoRd
ABout mAnAgIng houRs.