Independent Contractor Compliance Blog - by Collabrus™

One of the planks in Obama’s platform for President was to install national health coverage for every American. The current economic climate, combined with some stakeholders’ opposition, is likely to slow implementation of a national health program. However, this program is reported to be on the new president’s short list of things to do, so potentially what does this mean to businesses who engage employees and ICs?

The “play or pay” penalty

Under the current version of President Obama’s plan employers who do not offer meaningful health plan coverage to their employees will have to contribute a percentage of their payroll as a penalty. This is called the “play or pay” provision.

Details to be worked out over the next months or year.

There are no real details available at this time, other than those provided during the election process. The detailed provisions of the plan are obviously subject to compromise and change, since this plan has yet to be taken up by congress and the other stakeholders. However, the percentage of penalty lawmakers are currently talking about under the “Play or Pay” provision range between 3% and 15% of payroll. Lawmakers fear that if the penalty is too low employers will stop offering coverage and pay the fines instead, shifting more costs of health coverage to a 100% government funded insurance program.

There are examples of current laws that mandate health coverage

Currently, there are several examples of local governments enacting some form of health coverage.

• Hawaii is the only state that requires employers to provide health benefits.*
• Both Vermont and Massachusetts have provisions to fine employers who do not provide health plans to their employees.
• The City of San Francisco recently enacted a health coverage law for employees who work within the city limits.
• Several other states have enacted similar laws over the last two decades, but they have been repealed, rejected by voters or challenged in court.

President Obama’s current plan calls for creating a National Health Insurance Exchange.

This proposes a government-run marketing organization that would sell insurance plans directly to anyone who does not have an employer plan or public coverage. It would also be available to independent contractors and small businesses with employees.

Small employer’s options

Many small employers do not currently offer health coverage to their employees because it is too expensive. Under the current proposal, the Obama plan would create a National Health Insurance Exchange for small employers to purchase coverage for their employees. The exchange is intended to create a pool of members to spread the costs out over a greater base.

Independent Contractors will be able to buy coverage.

One aspect of President Obama’s proposed health plan would give IC’s the choice of either buying health coverage that is similar to the plan available to federal employees and members of Congress or to purchase private health insurance through the proposed National Health Insurance Exchange.

To stay competitive in attracting the best contingent worker and IC talent you may need to offer health insurance as part of the compensation package.

If this becomes law in the future, I can foresee IC’s negotiating with their client company to pay the cost of health insurance coverage, since it will be available to everyone. Companies wanting to attract the best talent will probably need to begin providing this coverage to their contingent workforce and IC’s.

How much will this cost businesses?

The costs are uncertain at this time and the current economic climate, combined with some of the stakeholders’ opposition will have a direct effect on the final version.  However, two possibilities are apparent:

• If you already provide coverage for your employees and contingent workforce, either directly or through a company like Collabrus, your costs will stay basically the same as now.

• If you do not then you may want to prepare for an increased cost of labor-both employee and IC.

I recommend that you stay ahead of the curve if you want to attract the highest level talent for your business.

—————————–

*Hawaii’s Prepaid Health Care Act of 1974.  Since Jan. 1, 1975, this law has required nearly all Hawaiian employers to provide health insurance to their employees who worked 20 hours or more a week for four consecutive weeks.