Commentary: Farm employers confront play-or-pay health care rule
Editor's note: Bryan Little is chief operating officer for the Farm Employers Labor Service and director of labor affairs for the California Farm Bureau Federation.
One of the cornerstones of the Patient Protection and Affordable Care Act (often called "Obamacare") is its "play-or-pay" mandate that requires certain employers to furnish health insurance meeting certain minimum coverage and cost thresholds.
The applicability of the play-or-pay mandate is one of the more complicated and confusing aspects of a complex piece of legislation. The implementation of the Affordable Care Act and the play-or-pay mandate will affect virtually every employer and employee in the U.S.
To help farmers and ranchers understand whether they will be required to furnish employees with health insurance under play-or-pay on Jan. 1, 2014, here are some basic questions and answers to them:
Are you an "Applicable Large Employer"? "Applicable Large Employers" will be required to furnish health insurance to their full-time employees by the play-or-pay mandate. These are employers who employed an average of 50 or more full-time employees and "full-time equivalent" employees per month in the prior year. For this purpose, calculate the average level of employment, month by month, in 2013. Employers with a relatively high number of employees for a few months, but relatively few the rest of the year, will see their averages reduced.
What is a "full-time employee" versus a "full-time-equivalent"? The full-time equivalent or FTE concept is intended to ensure employers will not replace all their full-time employees with part-timers to avoid the Affordable Care Act coverage mandate. For play-or-pay purposes, a full-time employee is an employee who works at least 30 hours per week or 130 hours per month. The number of FTEs is calculated by adding together all the hours that part-timers work in a month and dividing that total by 120. So, an employer with 10 employees who work 100 hours per month in any given month has eight full-time equivalents who will count toward the 50-employee threshold.
How does an employer calculate whether the 50-employee threshold has been reached? If the sum of your full-time (30 hours/week or more) employees and your FTEs exceeds 50 on average for all the months of 2013, you will be an "applicable large employer" covered by the play-or-pay mandate. However, "seasonal" employees don't count toward the 50 employee/FTE total.
What's a seasonal employee? For the purpose of calculating employee totals to determine the applicability of play-or-pay, seasonal employees do not count toward the 50-employee threshold. Any employees who performed seasonal labor for 120 or fewer days are not counted toward the total number of employees in the months they work. Thus, when calculating monthly full-time/FTE employee totals, exclude employees who worked 120 or fewer days in that same year. In contrast, an employee who worked in that month and ultimately worked more than 120 days in that year is included in the total for that month.
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