Prescott wrestles with Obamacare
PRESCOTT, Arizona - Brush-removal workers, park scorekeepers, snowplow operators, City Council members - as part-time or seasonable employees, they all raise questions for the city under the new U.S. Affordable Care Act.
On Tuesday, the Prescott City Council heard a report from a health insurance consultant on the impacts to the city of the federal health care act.
The city, with its 503 full-time employees and 172 temporary employees, far exceeds the Affordable Care Act's 50-employee threshold for "large" employers. As such, consultant Aaron Polkoski said the city must comply with a host of new health insurance rules.
And the message from Polkoski was clear: In order to meet the various compliance deadlines, the city must be proactive now, or face significant penalties.
"Large employers need to learn the ins and outs of the penalty tax," Polkoski's presentation stated.
For instance, he told the council that beginning in 2015, employees working at least 30 hours per week (130 hours per month) are considered full-time employees and must be offered minimum essential health care coverage.
But Polkoski noted that large employees have the option of using an IRS "safe harbor" method, allowing large them to look back at the past three to 12 months to determine whether seasonal employees are indeed full-time.
A key advantage of the safe harbor option, said Polkoski, is that a "variable hour or seasonal employee does not have to be offered coverage during the measurement period."
The discussion raised a question from Councilman Charlie Arnold, who pointed out that City Council members receive W-2 tax documents for the $500 per month that they earn for serving on the council ($750 for mayor). Noting that council members work a varied number of hours per week, Arnold asked whether the Affordable Care Act would apply.
City Manager Craig McConnell responded that the act had generated many similar issues, for which the city was still working to answer the question: "What are you? Are you part-time or full-time?" He added, "I can't answer you today, but it is a very good question."
The question extends to the city's many seasonal fire-department brush-removal workers and parks and recreation scorekeepers and greens keepers, McConnell said, who might exceed the 40-hour workweek during peak times, and then work no hours other times of the year.
While some of the questions have been answered, McConnell said. "Some are still open at the federal level. In large part, the implementation is not spelled out in the legislation. It says what you have to do, but it does not spell out how to implement it."
Tuesday's presentation was an attempt by the city to learn in advance what would be required, McConnell said.
Polkoski outlined two of the main penalties:
The no-coverage penalty, which requires that a large employer must offer 70 percent (95 percent in 2016) of its full-time employees and their dependent children up to age 26 an opportunity to enroll in group medical plan coverage. Non-compliance would result in a penalty of $2,000 per year, multiplied by the number of full-time employees.
For Prescott, McConnell pointed out that would result in a penalty of about $1 million.
The affordable coverage penalty, which comes with an annual $3,000 penalty for each full-time employee whose employer insurance is deemed to be unaffordable (under requirements spelled out in the act), and who is certified to receive a government subsidy for health insurance.
Noting that the Congressional Budget Office had projected that U.S. employers would have to pay a total of $150 billion in penalties related to the act over a 10-year period, Polkoski emphasized the importance of careful compliance. As part of his presentation, he gave the city a "to do" list to prepare, including evaluation of part-time and seasonable employees.
Polkoski, who is a consultant for the combined trust, noted that the city appears to be on track to comply with the affordability of its insurance options. "You will be well below (the thresholds)," he said. "We don't see you getting anywhere close to that."
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