July 2012

If you haven’t heard about the Supreme Court’s 5-4 decision to uphold the individual mandate provision of “ObamaCare”, you’ll likely be pleased to know that “Gone with the Wind” won the Oscar for best picture.

Volumes are being written about how this law will affect individuals, yet those of us who depend on the flexibility of contract workers may not have a clear picture of how the PPACA (Patient Protection and Affordable Care Act) might affect our businesses. The degree to which we’ll get pulled into the “Play or Pay” decision hinges on whether our contract workers if they’re classified as W-2 employees, are deemed full or part-time.

You see, beginning in 2014, employers having more than 50 full-time employees must offer them health coverage or pay a $2,000/employee penalty. Play or Pay. So what constitutes a full-time employee? That’s a key question. The language used in the PPACA states that an employee who works 30 hours or more per week is considered full-time. But what if this employee is part of your variable workforce and doesn’t work for your company every week? Does it still make sense to consider them full-time? In its current form, PPACA’s answer to that question would be “yes.” Those of us running businesses on ever-thinning margins might wish to disagree. But there is a proposed solution out there …

Here’s Looking Back At You, Kid:

The American Staffing Association has been lobbying the Feds to add a 12-month “look back” regulation to the law. This would exempt (at least temporarily) employers from paying the penalty until they are able to calculate a 12-month average of hours worked per week for the employee. If it’s under 30, the employee is deemed part-time and no penalty is assessed. (This is a hugely simplified explanation, but I’m sure I’d lose you if I went into any more detail.)

How about we forget all this complicated look-back averaging, et cetera, et cetera? Let’s just repeal the law! Well, don’t hold your breath on that happening. To repeal PPACA you’d need a Republican president and 60% GOP control of both houses of Congress. You never know, but I think that’s a long shot in the short term.

Instead, let’s focus our attention on regulating this law to ensure it works for the burgeoning contingent workforce upon which our economy now depends.

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I never imagined I could actually feel sorry for any insurance company. By that I mean, feel sorry for its corporate balance sheet. I’ve got close friends working for behemoths in the industry and I could never feel ambivalent about their misfortune. But since learning about the underlying causes behind the trend in workers’ comp insurance rates, I’ve actually experienced a few moments of sympathy for these businesses.

Most Workers’ Comp carriers are faced with significantly declining profits related to escalating claims costs and operating expenses. Industry data shows the “combined ratio” for 2010 at 128%; meaning for every dollar a carrier takes in, they are spending $1.28 in claims and expenses. Ouch!

And since these guys’ investment portfolios aren’t doing any better than mine, it is not surprising to see rates on the rise. Many employers have already experienced increases in their workers’ compensation rates as high as 20% and in some instances, much higher. If your business happens to be located in California, you already know what I mean.

Actually, my heart stopped bleeding for our own carrier when I found out how much our Workers’ Comp premiums have increased in 2012. Let’s just say that managing this part of our business now has my full attention. So what strings can you pull to get your carrier’s size twelve back on the floor where it belongs?

1. Safety … safety … safety. The best W/C claim is the one that never happens. And that means maintaining a work environment where doing jobs safely becomes second nature. Think regular safety meetings, on-going education, even performance metrics for managers.
2. Tighten up your claims management process. Make sure that reserves are accurate and your adjuster knows you’re engaged and motivated to get a speedy resolution.
3. Finally, implement a return to work program for injured workers who have been cleared for modified duty. I’ve seen how remarkably effective this tool can be.