As employers across the country work to adapt their business practices in the wake of the Federal Health Care Reform Act, Warsaw Community School Corporation Chief Financial Officer Kevin Scott prepared a presentation for the school board in last night’s Board Work Session of what changes the school corporation will be making as a result of the reform.
Scott began his presentation by discussing the program in detail. According to Scott, the program was enacted in March of 2010. Though there are over 1,000 pages of legislation, Scott stated that rules and regulations in accordance with the new program are still being developed.
“Its a federal program that all employers must comply with,” stated Scott. “For us, we have to avoid the big penalty. Being the fifth largest employer in the county, this will have a big effect on us. I’ve attended many sessions and listened to folks talk about this from different perspectives and rules are still being developed –2014 is really a cornerstone year because that is when exchanges have to be launched.”
According to Scott, because Indiana declined building a state exchange, Hoosiers will instead be utilizing a federal exchange when seeking an individual mandate that will include a federal tax credit that Scott states will be offered to approximately 68 percent of the population. This credit is not available if you are eligible for adequate and affordable employer coverage.
Scott states that the school corporation will be undergoing it’s first measurement period from October to March. During this time period the school corporation will be diligently collecting and documenting hourly employees hours worked. Should individuals average 30 hours a week or more, Scott states that the school corporation will have to offer them insurance.
“There is a measurement period where all employers are going to have to look at all the hours collected by their employees and for us this is tricky because thats not only the working hours of the custodian or classroom assistant, we have to collect hours if they are coaching, collecting tickets at the basketball game or are substitute teachers,” said Scott. “If they averaged more than 30 hours we have to offer them insurance. For us, were at a transition here that will be six months each. We are going to have our first measurement period from October to March. Anyone who averages 30 hours a week or more, we have to offer them insurance. They will be able to come on the plan on July 1, which is when our plan renews.”
Though many school employees may only work throughout the academic school year, Scott states that schools are prohibited from “watering down” an employees averaged hours. Should an employee work for 9 months, WCS is not permitted to average that employees hours over an entire year. Instead, hours must be figured based on the total months that employee worked. Should the school fail to offer those eligible insurance, Scott states the penalties are extreme.
According to Scott, “If you don’t offer those eligible insurance and they go out to the Federal Exchange and they apply for a credit –and most employees with us will be able to apply for a credit and get a credit –then the IRS will contact us and say they had a person apply for a credit and we will be in a position that we have to prove that they were eligible and we offered insurance. If they find us at fault, they will charge us $2,000 for every employee that we have. That could be a $2 million or more penalty. We cannot put ourselves in a position to risk getting the ‘big penalty’.”
With a careful approach necessary in ensuring that employees who are not offered insurance to don’t amass more than 30 hours a week, Scott states that the school corporation has already adjusted its practices in preparation for their measurement period. According to Scott, of the approximate 550 hourly employees currently employed by WCS, 133 of them will continue working over the 30 hour threshold and will be offered insurance through the school corporation. Though many hourly employees will see some adjustment in their hours to comply with the school corporations new 27.5 hour maximum for non-insured employees, Scott stated that he does not believe this will prove detrimental to those currently employed there.
“We had a number of people who were scheduled to work 32 hours a week and now are working 27.5 hours. Schools are not able to pay the best so I think the reason folks work for schools are because it fits their schedules better or it puts them on the same cycle as their children so if we have school delay or weather cancellation, they can be home. It helps them with childcare. I think (with) that (being) the reason that folks come to work for schools, it probably helps us with having a little reduction in hours because it may not cause them to look elsewhere because they like their schedule working with the school,” stated Scott.
As schools begin documenting hours and adjusting accordingly, Scott noted that the new approach in how hours are structured among hourly employees will not affect the level of care students are currently receiving. According to Scott, the total hours allocated to each building has not decreased but instead increased slightly amongst schools within the corporation.
Though Scott states that the school corporation would love to be able to offer all employees health insurance, he states that the cost is dramatic. Scott estimates that the cost to offer every employee insurance would be approximately $2.5 million. In a graph provided during his presentation, Scott noted that as of May 16, the cost projections associated with the new medical plan amounted to $744,800.
Click here to view the Affordable Care Act presentation.