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How will the Affordable Care Act Affect Temp Staffing Agencies

Posted on September 10, 2013 in Staffing

The Patient Protection and Affordable Care Act (ACA) was signed into law by President Barack Obama in March 2010. One of the functions of ACA is to make family planning services and preventative care more affordable for American workers. The law was designed to take effect in stages, with much of its implementation yet to come. As of January 1, 2014, all Americans are required to carry health insurance for themselves and dependent family members. This does not include disabled adults and senior citizens who are covered by other government programs.

Each state is required to make a health insurance marketplace available to residents as of October 1, 2013. People who have a household income less than $48,283 may be able to purchase discounted health insurance through their state marketplace. They may also qualify for lower out-of-pocket costs, such as deductibles and co-pays. Additionally, the law forces insurance companies to provide coverage for pre-existing conditions. The ACA, also nicknamed Obamacare, is intended to help people who aren't eligible for health insurance through an employer or who can't get approved for private insurance due to pre-existing health conditions. The president also hopes that the ACA will help healthcare providers across the nation decrease the cost of treating uninsured patients.

Consequences of Failure to Comply

Beginning on New Year's Day of 2014, companies that employ 50 or more workers are required to offer health insurance to employees who work at least 30 hours a week. Individuals also face a tax penalty for failing to purchase health insurance if it is not available to them through an employer. This penalty will be imposed on the individual's 2014 tax return.

How Obamacare May Impact the Temporary Staffing Industry

Businesses with more than 50 employees face huge costs to comply with the mandates of the ACA. For many of them, hiring workers through a temporary employment agency is a much more attractive option. In addition to the cost of providing additional coverage, employers must contend with administration expenses and tracking who is eligible for benefits. These added expenses mean that employers could see their profit margin get smaller or force them to increase prices. Some business owners may turn to temporary staffing agencies in order to avoid these issues.

The temporary staffing industry is already doing well, thanks in large part to uncertainty caused by the economic recession towards the end of the last decade. Businesses of all sizes do not have enough confidence in the economy to resume permanent hiring. According to Tobey Sumner, a financial analyst employed by SunTrust Robinson Humphrey, the ACA will directly cause an increase in the number of temporary workers. This comes on top of the news reported by Susan Houseman, an economist at W.E. Upjohn Institute, that the percentage of temporary employees in the United States has reached an all-time high.

Staffing Agencies Must Prepare to Respond to the ACA

Owners of temporary employment companies would be wise to gear up for the influx of business that could come their way after the first of the year. This includes hiring more internal staff as well as recruiting higher numbers of temporary workers. The biggest increase in business should come from small to mid-sized organizations looking to stay under the 50-employee mark.

Once Obamacare goes into effect, full-service staffing agencies are expected to be in higher demand. In addition to screening and placing workers, more business owners will look to staffing agencies to help them navigate the ACA. Some business owners simply won't have the time to deal with the increased regulatory burden the new law requires. Owners of staffing agencies can attract new clients by positioning their firm as an expert in all matters related to Obamacare.

How the ACA Challenges the Temp Staffing Industry

The healthcare reform act requires employers to offer health insurance to employees who average 30 hours per week in a given month. This means that if the employee works full-time through a temporary for 30 days, he or she must be offered health insurance during that time. This could pose a challenge because not all insurance companies are willing to work with temporary staffing agencies, which have notoriously high turnover rates. Since Obamacare lifts lifetime restrictions on benefits, it could be even more difficult for staffing agencies to find insurers that are willing to take on its workers. Temporary staffing companies that want to attract more workers and clients should develop a plan for offering insurance prior to the implementation of the new law.

Staffing Agencies Also Subject to Fines

Because of the way full-time status is calculated under the healthcare reform act, temporary employment agencies also face penalties for failure to comply. A newly-hired employee who is expected to work more than 30 hours a week must be offered health insurance coverage within 90 days of his or her start date. Temporary employment services who do not comply with this requirement may be subject to a $2,000 fine per employee.

However, there is an exception to this rule. The Internal Revenue Service (IRS) does not require staffing agencies to offer health insurance coverage if the employee is expected to have an erratic pattern of assignments that will keep him or her below the 30-hour minimum. It is important to keep in mind that the IRS calculates average number of hours worked per month and not per year.