Guide to ACA Healthcare Benefits for Staffing Agencies

The Affordable Care Act (ACA), also known as Obamacare, was one of the most comprehensive healthcare reform laws in US history when the US government enacted it. 

The ACA's overall goal was to provide more Americans with better health insurance coverage. The law accomplished this in several ways, and extensive research shows that populations who benefited from the act are much healthier and have access to higher-quality healthcare. 

However, the most critical aspect of the ACA for staffing agencies was the mandate for large employers (who employ 50+ employees) to offer health benefits to their employees. 

The ACA mandates specific health insurance obligations for employers, which can be challenging to manage due to the variable and temporary nature of the staffing industry. 

Staffing agencies must consider multiple key components of ACA benefits, focusing on Minimum Essential Coverage (MEC), Minimum Value Plans (MVP), employer penalties, applicable employee types, look-back provisions, and the complicated distinctions between full-time and part-time employees.

Understanding ACA Compliance for Staffing Agencies

The ACA imposes specific requirements on large employers, defined as those with 50 or more full-time employees or full-time equivalents (FTEs), any employee who works 30 hours or more a week.

Given their scale and employee turnover, staffing firms typically qualify as large employers. As a result, they must offer health insurance coverage to eligible employees, or they may face significant penalties. 

Minimum Essential Coverage, Minimum Value Plans and Affordability

The first step to compliance with ACA healthcare benefits is to provide a healthcare plan that meets ACA regulations. Unfortunately, it’s not as simple as finding the cheapest possible coverage and offering it to some of your employees.

To comply, staffing agencies must offer health insurance that meets three main requirements: Minimum Essential Coverage, Minimum Value Plans, and a yearly affordability requirement updated in line with inflation.

• Minimum Essential Coverage: MEC refers to any health insurance plan that includes a basic level of medical care. Under ACA regulations, large employers must offer MEC to at least 95% of their full-time employees and any dependents under age 26.
• Minimum Value Plan: Beyond MEC, the plan offered must also qualify as a Minimum Value Plan, which means it should cover at least 60% of the total allowed benefits costs for a standard population. This ensures the plan provides comprehensive coverage.
• Affordability Requirement: The employer must ensure the plan is affordable to avoid further penalties. In 2024, the IRS considers a plan affordable if the employee’s share of the premium for self-only coverage does not exceed 8.39% of their household income.

What If I’m Found Non-Compliant?

The Affordable Care Act is a federally backed piece of legislation, and penalties for non-compliance can be severe. Employers found to be non-compliant will face two different types of penalties depending on which part of the ACA they violate.

1. A Failure to Offer MEC: If an agency does not offer MEC to at least 95% of full-time employees or full-time equivalents, and at least one full-time employee qualifies for a subsidy through the ACA marketplace, the IRS will fine the agency a penalty of approximately $2,970 per full-time employee. It’s worth noting that the fine is only applied to each employee and agency staff above 30.
2. Failure to Offer MVP or Affordable Coverage: If the staffing agency offers MEC but fails to meet MVP or affordability standards, and at least one employee qualifies for the ACA, the penalty is $4,460 per affected employee.
3. Failure to Offer Both: If a staffing agency fails to provide the MEC and MVP, the IRS will fine it with the larger of the two penalties.

Who is Subject to ACA Compliance?

ACA compliance requirements apply specifically to large employers, defined as those with 50 or more full-time employees or the equivalent of part-time employees.

The ACA defines a full-time employee as someone employed by an agency who works an average of 30+ hours a week or 130+ hours per month. If a staffing agency has 50+ of these types of employees, then it is required by law to provide coverage for at least 95% of its employees. 

If employees work less than 30 hours per week, the ACA considers them part-time, so a staffing agency is not required to provide health insurance. However, the government does use these hours to calculate whether a staffing agency is qualified as a large employer. 

Part-time employees determine whether a staffing agency qualifies as a large employer by calculating full-time equivalents (FTEs) by adding the total hours all part-time employees work in a given month. 

Once the total is calculated, it is divided by 120, as the ACA defines 120 hours per month as equivalent to one full-time employee. The IRS then adds the resulting number of FTEs to the total number of full-time employees, defined as those working an average of 30 or 130 hours per week. If the combined total of full-time employees and FTEs reaches 50 or more, the agency is classified as a large employer and must comply with ACA regulations.

Staffing agencies can use the ACA’s look-back provisions to determine the eligibility for health benefits of employees with fluctuating schedules, such as seasonal employees. This allows agencies to track hours over a set period to confirm full-time status.

Look-back provisions allow staffing agencies to use a measurement period of up to 12 months to track employee hours and determine whether they qualify as full-time. 

Suppose an employee is determined to be full-time after the measurement period, meaning they work more than 130 hours a month on average. In that case, the agency must offer coverage during a stability period, regardless of any employee hours changes.

The ACA allows an administrative period (up to 90 days) between the measurement and stability periods. This gives staffing agencies time to calculate employee eligibility and offer coverage accordingly, so there is no rush.

Staying Compliant, How Do I Report To The IRS? 

Reporting for the ACA is done through two forms, the 1095-C and 1094-C. 

Form 1095-C provides detailed information about the health coverage plan offered to full-time employees, while Form 1094-C summarises the employees who receive a healthcare plan. 

This reporting verifies whether the health coverage meets Minimum Essential Coverage and Minimum Value Plan standards and whether it is affordable for employees.

It’s vital that you, as a staffing agency, be diligent in the reporting process. Errors such as incorrect employee classifications, incomplete data, or misstatements about coverage can result in fines totaling $610 per violation and even IRS audits. 

How Can an EOR Like Ascen Help Mitigate Your ACA Risks?

For staffing agencies, using an Employer of Record (EOR) platform like Ascen is an effective way to manage ACA compliance risks. The EOR assumes the role of the legal employer for temporary or contingent workers, taking on responsibilities that include providing benefits, managing payroll, and handling ACA reporting obligations. Here’s how an EOR solution can help minimize the burden of ACA compliance:

Employer Responsibility Transfer

When a staffing agency uses an EOR, the EOR becomes the legal employer of the workforce, assuming the ACA compliance obligations. This includes ensuring that health insurance meets Minimum Essential Coverage and Minimum Value Plan requirements. The EOR directly provides health benefits to workers, relieving staffing agencies from the complexities of ACA compliance and the risks of penalties for insufficient coverage.

ACA Reporting and Filing

The EOR is responsible for all ACA reporting to the IRS, including Forms 1095-C and 1094-C. Form 1095-C reports health coverage details for full-time employees, while Form 1094-C serves as the summary transmittal to the IRS. Our platform ensures that these filings are accurate, timely, and meet all ACA standards. This reduces the risk of IRS penalties and ensures compliance with MEC and MVP standards.

Managing Variable-Hour and Seasonal Employees

The EOR also helps manage variable-hour and seasonal employees, using look-back periods to determine full-time status. The EOR's back office system tracks employee hours, assesses eligibility, and administers health benefits accordingly. By partnering with an EOR, staffing agencies can avoid the administrative burden of monitoring hours and ACA compliance for variable-hour workers. Ascen's expertise in managing diverse employment patterns ensures that workers receive the correct benefits based on their hours worked.

Cost and Risk Mitigation

The EOR also takes on the financial risks associated with ACA compliance, including potential penalties for non-compliance and the costs of offering health insurance. By utilizing EOR services, staffing agencies can focus on core business operations while minimizing ACA compliance's financial and operational risks. This is especially valuable in staffing, where managing a large, fluctuating workforce can make compliance challenging.

Customizable Benefits and Compliance Solutions

Employer of Record services can provide flexible benefits packages that meet ACA requirements while aligning with temporary or contingent workers' unique needs. This customization ensures compliance and cost-effectiveness. The EOR will also stay current with ACA regulations and compliance requirements, providing staffing agencies peace of mind that their workforce is always covered appropriately and by the latest laws.

If you’d like to see how Ascen's EOR could help you comply with the ACA, please book a demo here.