The Affordable Care Act
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The first thing to know about the Affordable Care Act (ACA) is that farmers are treated just like everyone else. That's good news, said Roberta Riportella, the Kansas Health Foundation professor of community health at Kansas State University. Riportella, along with Barbara O'Neill, a financial resource management specialist at Rutgers University, presented a webinar that explains the ACA and its implications for farmers.
Farmers need to know about the ACA as consumers and as employers. The consumer mandate requires all individuals to purchase health insurance or pay a penalty. Likewise, employers, including farmers, who meet established criteria must offer "adequate and affordable" coverage to their full-time employees or pay penalties.
Farmers as health care consumers
"Farmers are consumers, and so they get treated the way consumers get treated," Riportella said. Farmers have traditionally faced increased health insurance rates due to hazardous occupation status, but the ACA disallows this treatment. Occupational risk cannot play a factor in the cost or availability of health insurance.
Farm families purchase non-employer-based insurance policies at a much higher rate than other families - 36 percent compared to 5 percent, according to Riportella. In many cases, health insurance coverage is used as a tool to manage the risk of losing the farm should unforeseen medical expenses occur. Health insurance can protect the family farm.
The ACA offers assistance in the form of tax credits to those who qualify. This assistance may make the cost of purchasing health insurance less than it has been for farm families who purchase their own policies, Riportella said.
Safeguards are also in place to keep employer-offered insurance policies affordable; this means coverage must not exceed 9.5 percent of an employee's annual household income. This potentially affects farmers not only as consumers, where they can benefit from these protections, but also as employers, where they may need to concern themselves with offering such plans.
Farmers as employers
Attorney Sheldon Blumling, who practices labor and employment law in Irvine, Calif., presented a "Key Issues for Agricultural Producers" workshop in conjunction with Farm Credit East and Cornell University. "Health care reform is a reality," Blumling said. "We are an industry that traditionally has not provided insurance benefits to large segments of our workforce." The ACA's employer mandate, he added, "may require you to provide coverage."
The first step to figuring out the ACA's impact on your business is to determine whether or not you are required to offer coverage to your employees. This step may be simple, since the mandate applies to businesses, including farms, with 50 or more full-time employees or full-time equivalents (FTEs) at any time during the year.
This is where it starts to get tricky. Full-time employees are those who work an average of 30 hours per week or more, or 130 hours per month on average (by IRS definition). For variable workers, with fluctuating hours throughout the year, the determining factor is the average hours per week over the course of a full year. These are your full-time employees, but your FTEs also need to be taken into consideration. If this amount plus the full-time employees is 50 or more, then you are required to offer adequate and affordable insurance for all full-time employees and their dependents.
"Guest workers are employees just like anyone else," Blumling said. "Anybody who is lawfully present in the United States is treated the same." There are rules in place for determining how worker hours are counted, and there are some exceptions that may be helpful to farmers.
A seasonal worker exception applies if there are 50 or more employees for a period of less than 120 days, and any employees in excess of 50 are seasonal workers. In other words, if you increase your staff for seasonal jobs requiring less than 120 days each year, and if that is the only reason you have more than 50 full-time employees or FTEs for the year, then you are given an exemption from the rule, he explained.
"A worker who moves from one seasonal activity to another while employed in agriculture is employed on a seasonal basis, even if he works for most of the year at the farm," Blumling said. This is good news for the industry and is specific to agriculture. "What matters the most is figuring out who is full-time and has to be covered."
For some employers, paying the penalty could potentially be less expensive than offering insurance coverage under the mandate. Employers will be penalized on their tax returns if they're required to offer insurance but don't. This tax penalty takes effect if at least one eligible employee purchases insurance coverage through the exchange with federal assistance.
There is a maximum 90-day waiting period for enrollment of newly hired full-time employees. For employees hired in variable-hour positions, a three to 12-month look-back period will apply, determined by the employer. This can help to keep some workers out of the full-time pool. The new default is that eligible employees are considered enrolled unless they opt out of coverage.
"Your requirement is not to make sure they get the coverage, just to offer it," Blumling said.
O'Neill explained that any employer with fewer than 25 employees who provides insurance can qualify for a tax credit. In order to qualify, the average wage of employees must not exceed $50,000 per year, an employer must pay at least 50 percent of the coverage premiums for an individual policy, and the policy must be affordable and adequate.
While mandated employers are required to offer at least one plan that meets affordability requirements for their lowest-wage workers, some employers may simply assume that they won't meet this requirement and plan to pay a penalty tax. If a lower-wage worker cannot afford - by definition - the lowest premium plan offered, they may go to the exchange and purchase insurance with federal tax assistance. In this case, an employer will pay a penalty for each person who opts to do so; however, there is a cap.
"In some planning, some employers assume they'll pay the tax," Blumling said. If coverage was made cheap enough to be affordable to the lowest-wage workers, the employer would be paying more overall for the premiums, and that cost could be much greater than the penalties incurred, he explained.
Subsidies, which are available to companies offering mandated coverage, are tax-deductible, while penalties are not. Insurance subsidies apply to employees who actually sign up for your coverage, rather than to all eligible employees. Blumling recommends that for planning purposes, consider that about one-third of eligible employees will elect coverage.
There are safeguards in place to prevent large corporations from simply creating small businesses that don't meet the employer mandate for offering coverage. "Sufficiently related entities are treated as one" for mandate purposes, but are treated separately with regard to any penalties incurred for not providing coverage. You can't, however, establish numerous small companies to capitalize on the 30-person exemption, he said.
For farms that have a large workforce, planning will require looking at many complex variables, and professional advice is invaluable. Farmers who are self-employed individuals, or who employ others as a small business not mandated to provide coverage, will still need to consider the health insurance options available to them, as the new rules create a new paradigm for health insurance coverage and should be given due consideration.
The author is a freelance contributor based in New Jersey.