What Will The Affordable Care Act Mean To Agriculture?

Charlie Egerton speaking at the 2013 All Florida Ag Show

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It is really, really big. While there has been a lot of debate about the Affordable Care Act (ACA), the massive size of the legislation also coined “Obamacare” that passed in 2010 is one area where all agree.

As the new law begins to take shape in advance of the launch of health care exchanges on Oct. 1 and full implementation in 2014, the ACA is hitting the headlines as the scale of the program unfolds.
“This is the biggest legislation passed by Congress in decades,” says Charlie Egerton, an attorney for Orlando-based Dean Mead law firm. “Not only is it lengthy in size, but the approach Congress took was to delegate much of the authority to the agencies involved in writing the rules.”

The original bill passed by Congress came in at 2,700 pages. Now that the regulations are being put to paper, the ACA has surpassed 20,000 pages.
What rules and regulations are in those pages are still being sorted out and its impact may take years to fully realize. But Egerton says growers need to act now and begin to get educated how the ACA could impact their business.

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There are two mandates under the ACA that are important to understand. The first is the individual mandate, which states everyone must have health insurance. Those who fail to buy coverage will be subject to a penalty paid to the federal government.

The penalty the first year is only $95 per individual, but will increase significantly in 2015 and beyond. Some cite that many young people will opt to pay the penalty because it will be much cheaper than paying for coverage. That’s problematic because the whole intention of the mandate is to broaden the pool of insured persons to spread risk and hopefully reduce premiums.

Individuals can obtain private insurance or seek coverage in newly established health care exchanges. Florida elected not to establish its own exchange, so it will default to the exchange set up by the federal government.
“We are ceding control of the exchanges to the federal government,” says Egerton. “The exchange’s insurance providers and those who will run it will all be selected by the federal government. I am not so sure of the wisdom of this, but that was what Florida chose to do.”
While the exchange is meant to be a “marketplace” of insurance providers competing thereby keeping costs down, it appears initially there may only be one insurance provider to choose from when it opens in October. “Because they are having so much trouble getting up and going, we’ve been told there may only be one vendor at least starting out,” says Egerton.

To Cover, Or Not Cover?

The other key mandate of the ACA is for employers to offer health insurance coverage to full-time employees and their dependents, if they are above a certain size. The important number to remember for the employer mandate is 50.
If an employer has on average 50 full-time employees or full-time equivalents, the company must offer minimum essential health coverage to them and their dependents. A full-time employee is one who works on average 30 hours per week or 130 hours per month. Full-time equivalents are determined by dividing the total hours worked by part-time employees by 120.

The coverage offered must be “affordable.” According to the law, that means the cost of coverage must not exceed 9.5% of an employee’s household income. The IRS has established several safe harbors, one of which would allow the employer to make this affordability determination based upon wage income on the employee’s W-2 statement.
In addition, the employer is required to pay at least 60% of the cost of providing health coverage. Coverage also is required to be offered to the dependents (children) of employees up to the age of 26.

Egerton says, for some companies that will be subject to the “pay or play” rules of ACA, it might make economic sense to pay the penalty for not providing coverage, which is $2,000 per employee after the first 30. “I can tell you for some, the $2,000 fine is going to be significantly less expensive than providing the insurance the government is mandating employers to provide.”

Seasonal Catch

While the vast majority of farms will fall below 50 full-time employees, the picture gets a little more complicated when seasonal workers are involved. Those who employ large numbers of people for jobs like harvesting will need to evaluate if special seasonal worker rules apply.
“First and foremost, employers need to determine if they are going to be caught by these rules,” says Egerton. “The test is do you average 50 full-time employees in the prior year? If you don’t, you are not required to offer coverage.”

Congress provided limited relief to farmers and retailers who have to ramp up the number of employees to accommodate seasonal harvests or holiday shopping. Under this special rule, if the employer averages more than 50 full-time employees for 120 days or less, and if this excess consists solely of seasonal workers, the employer will not be required to offer health care coverage.
“But, citrus harvest generally runs up to nine months, so unfortunately, this would not qualify for the seasonal work exception.”

In addition, Egerton says the health care law could highlight problems with undocumented workers harvesting crops. “In general, if you hire a non-resident alien, you don’t have to count their hours or cover them,” he says. “It could flush out a number of situations if you are paying people but not offering them health coverage. If your answer to that is they are non-resident aliens, then the question becomes have you violated any rules by hiring them?”

Act Now

The full implementation of the ACA is fast approaching. For that reason, Egerton urges everyone to get up to speed on how the law will affect them personally or their business.
“If a business is close to the edge of 50 full-time employees or is not sure how his or her seasonal workers figure into the scheme, I’d suggest they consult with a professional advisor,” he says. “By Oct. 1, you have to be committed and have coverage lined up, so they need to be working on those decisions right now.
“This is a whole new regulatory regime that we all are going to have to learn how to live with. We’ll have to figure out what the costs are going to be and make business decisions the best we can based upon that information.”

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