Updated on February 11, 2014 to reflect recent changes to requirements and effective dates.
It's official: the new healthcare reform is not going away. Not only was the Patient Protection and Affordable Care Act upheld by the Supreme Court last spring, but the IRS also released the regulations with some rules specifically for educational organizations like school districts.
The preparations are beginning now for many school districts who are realizing the far-reaching effects of the mandate on part-time employees — including substitute teachers.
Keep reading to learn some of the key points of the Affordable Care Act and why now is a crucial time to prepare.
Frontline Technologies does not provide tax or legal advice. The regulations are constantly changing and we encourage you to consult your tax or legal counsel for advice specific to your district.
The Patient Protection and Affordable Care Act — Yep, it's a mouthful. Which is probably why most districts refer to it as PPACA, the Affordable Care Act, ACA or just "Obamacare." PPACA was officially passed in March 2010 but activities were mostly at a standstill until the Supreme Court upheld the law in March 2012.
Employer Shared Responsibility — Also known as the Employer Mandate or the deceptively cute "Play or Pay" provision, this portion of the bill specifies that employers must provide affordable health coverage to full-time employees and their dependents or face a penalty.
Large Employer — While it might not seem that big, "large employer" has been defined as any employer with 50 or more full-time employees, including full-time equivalents (FTEs).
Full-Time Equivalent (FTE) — A full-time employee is now defined as any employee working an average of more than 30 hours a week or 130 hours a month. Part-time employee hours also count toward your total: you add up the total hours worked in a month by part-time (under 30 hours) employees and divide by 120 to get a "Full-Time Equivalent" count to add toward your total. FTEs count when determining your "large employer" status but do not count toward any penalties.
Look-Back Measurement Method — To determine whether or not a part-time employee qualifies for benefits, districts can choose a 3-12 month "look-back period." If the average hours worked in this "measurement period" come to 30 or more, the employee is eligible for benefits in the next "stability period." We'll look in a minute at some special calculations for subs.
The Exchange — Don't provide your employees with insurance? Well, then your employees might go over to a state (or federal) exchange where they can purchase health insurance if they qualify for a premium tax credit. And there's a lot of rules about that, too – but let's keep going for now.
You've got the terms down — now let's jump into some of the key points of the healthcare reform that affect school districts and subs.
Here are just a few of the regulations that might affect the way your school district handles substitute teachers.
Effective Date: First, the employer mandate reporting requirements were delayed until January 1, 2015. Now, the Obama administration has granted employers with between 50 and 99 employees until January 1, 2016, to comply with the employer mandate. These organizations will still be required to report on employees and coverage in 2015, but penalties will not apply until 2016.
Also, the regulations include transition relief for employers with fiscal year plans, which delays the implementation of the requirements for those employers until the start of their actual fiscal year in 2015.
Employer Mandate: Districts must provide affordable health benefits to all full-time employees (employees who work an average of 30 or more hours a week or 130 or more hours a month).
Penalties: If you do not provide affordable benefits — and at least one of your employees qualifies for a voucher to purchase insurance through an exchange — you get a penalty. How much annually? There are two categories:
1) No Coverage: $2,000 per full-time employee (not counting FTEs or the first 30 full-time employees) if at least 1 employee receives a premium tax credit for the exchange. This penalty does not apply if you offer coverage to at least 70% of full-time employees in 2015 and 95% of full-time employees, starting in 2016.
2) Unaffordable Coverage: $ per full-time employee who receives a premium tax credit (but not to exceed the penalty if you provide no coverage). Ouch.
Educational Institutions and Employment Break Periods: Ok, this part is important! The regulations include rules specific to educational organizations like school districts. Districts may not calculate "employment break periods" (like summer break) in a way that would significantly detract from an employee's overall work average. The healthcare law gives districts two options for calculating an employee's average hours worked:
1) Average the hours without including the employment break period
2) Credit the average hours from the active period to the employment break period
This clarification is significant for substitute teachers. It means you most likely cannot use those summer months when substitutes don't work to lower a substitute's average below full-time status.
Seasonal Employees: Wondering if you can count a substitute teacher as a temporary or seasonal employee? The answer is "no." The regulations make it clear that employees who work for an education organization with "employment break periods" do not count as seasonal employees.
So What Do I Need To Be Doing?
Tracking, Tracking, Tracking — Though "Obama Care" doesn't go into effect for most districts until January 2015, it's that look-back measurement period we talked about that makes 2014 important. Districts on a calendar year will need to look 3-12 months back into 2014 to average out employee (including substitute) hours and determine if they're eligible for benefits.
If you use an automated substitute placement and absence management system with custom reporting tools, you should be able to pull reports that track a substitute teacher's hours worked per week or for any given time period. For your part-time employees, a time and attendance system would give you accurate reports on actual hours worked by any of your part-time employees on the system.
Start Planning — Get discussions going at your district and start looking at your options. For substitute teachers, some districts are considering setting subs up as independent contractors (varies by state), outsourcing subs through a staffing agency, hiring more permanent substitutes or limiting substitute hours to under 30 hours a week. Start thinking about the best options for your school district.
Follow the News — The law is still being adjusted, so keep an eye out for the updates.
Talk to Some Experts — If you work with a benefits administrator, you can get some information specific to your school district from them or from your insurance carrier. For authoritative information specific to your situation, we recommend talking to your tax expert or legal counsel.
We're just scratching the surface of the healthcare regulations. Check out some of these great resources for more detailed information.
Final Regulations Fact Sheet: An overview of the final regulations for Employer Shared Responsibility
Final Regulations – Full: The full regulations on Employer Shared Responsibility – 227 pages!
Affordable Care Act Resource Center for Districts: Resources specifically for school districts
How Are Districts Preparing for the ACA? INFOGRAPHIC: What districts are doing to prepare
School District Staying on Top of Health Care Changes: How one district is getting ready
Update on the Affordable Care Act: Post from July 2013 on the delay to the employer mandate
Healthcare Reform Q&A for Employers: Got questions? Check out a whopping 370 FAQs on the Healthcare Reform. (Gallagher Benefit Services: January 31, 2014)
Making the 'Play or Pay' Decision: An informative article weighing the financial pros and cons of providing benefits or not. (SHRM: February 4, 2013)
What is your district doing to prepare for the Affordable Care Act? Share your comments on a social network or contact us with any questions!