Affordable Care Act – Be Ready for Implementation

Full implementation of the Patient Protection and Affordable Care Act (ACA) is less than a year away.  Regulations impacting school districts have been issued and more are likely.  The ACA requires “large employers” to provide “affordable” health coverage of “minimum value” to “full time employees” and their dependents.  Effective January 1, 2014, large employers who fail to provide such coverage to all of their full time employees and their dependents may be subject to “shared responsibility” monetary penalties.  These penalties will be triggered whenever the full time employee (or his or her dependent) of a large employer qualifies for and uses a tax subsidy or credit to purchase coverage on a health care exchange.  What does this mean for school districts?  As with most legislation and regulations, it must be analyzed by examining each of its component terms.

First, in all likelihood, most school districts will fall within the definition of “large employer.”  A large employer is any employer who employs at least 50 full time employees or an equivalent combination of full time and part time employees during the preceding calendar year.  A “full time employee” is defined in the ACA as any employee who is working an average of 30 or more hours per week.  Based on this definition, there are few school districts which will not have at least 50 full-time employees.  However, there are two questions which impact this determination.  First, many school employees only work nine to ten months out of the year.  Are these school employees included in determining whether the 50 “full time employee” threshold has been met?  According to the latest regulations issued by the Treasury Department and Internal Revenue Service, nine to ten month employees of school districts are treated as full time employees for purposes of the ACA.  Second, how do substitute teachers factor into this analysis?  If a substitute teacher works an average of 30 or more hours a week, even though there may be short breaks between substitute assignments, the regulations do not consider the substitute teachers as “seasonal employees.”  Depending on the average hours worked, a substitute could still be considered a full time employee under the ACA.  When all these factors are considered, most school districts will be considered “large employers” and will be subject to ACA’s penalties.

Since most school districts will be “large employers” for purposes of the ACA, the next question is “what constitutes minimum essential coverage.”  Examples of health insurance coverages which satisfy the “minimal essential coverage” requirements of the ACA include: coverage under government sponsored plans; employer sponsored plans; plans in the individual market; grandfathered health plans; and any other health benefits coverage, such as a state health benefits risk pools, as recognized by the Secretary of Health and Human Services.

Before offering “minimal essential coverage” to those employees not currently covered by a health insurance plan, the school district should remember that ACA does not require employers to offer health insurance coverage to their employees.  However, beginning in 2014, large employers who do not offer “minimum essential coverage” will be subject to penalties if any of their employees receive government subsidies for health insurance coverage through an exchange.  Penalties under ACA only accrue with regard to those employees actually working an average of 30 or more hours per week.  As stated above, this could include some substitute teachers.  To make an informed decision, school districts must weigh the cost of providing the health coverage against the monetary cost of the potential penalties.  Depending upon the circumstances, the cost to provide the health coverage may exceed the penalties which might be assessed.

With the effective date of the ACA rapidly approaching on January 1, 2014, the above analysis by school districts should be undertaken immediately.  For a more detailed overview of how ACA may impact your school district, download a Frequently Asked Questions document here – ACA FAQ.

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