What Does a Health Insurance Mandate Mean for Construction Industry Employers?
Both the House and the Senate have many ideas when it comes to health care reform, but the one proposal that appears to be present across the board is a requirement for private companies to provide health insurance for all employees and their families. While this mandate may be well-intentioned, what does it actually mean for America's employers?
According to H.R. 3200, a proposed bill known as America's Affordable Health Choices Act of 2009, employers will be required to provide a "Qualified Health Benefits" plan for all employees and their dependents or face stiff penalties. This proposal, commonly referred to as "pay or play," would require employers with an annual payroll of $500,000 or more to either provide the minimum amount of health insurance coverage for their employees and their respective families, or pay a payroll tax penalty of 2-8%, even for employees who decline coverage offered by the company. It is unclear whether or not coverage will be required for temporary and part-time employees or if coverage will be required for employees on their first day of work. The bill only states that employers would have to make contributions for their non full-time employees on a pro-rata basis. These two issues raise concerns for the construction industry where many, if not most craft and specialty trade workers may be part-time and/or seasonal employees. The bill, however, does clearly state that coverage and the tax penalty will not be required for employees who are covered under another qualified plan as a spouse or dependent.
For years, many employers have voluntarily provided health insurance options to their employees as a means of competing with other employers in order to attract the best talent, while also providing for the well-being of employees and their families. In addition to health care benefits, many employers also offer other fringe benefits to attract and retain employees, such as paid sick leave, paid vacations and flexible hours, to name a few. Due to the current state of the economy, construction industry employers are already doing what is necessary to cut costs while trying to save jobs. In order to meet the additional financial obligations of this mandate, many employers may be forced to shift the costs of doing business even more by possibly eliminating some of these fringe benefits, cutting pay or even cutting jobs. Some employers may also choose to pay the required penalty instead of providing coverage because it may be a less costly option for them, leaving employees without the coverage they previously received.
There is, however, some saving grace for small construction employers. According to the bill, small businesses with a payroll of less than $500,000 would be exempt from the payroll tax penalty and certain small businesses would be eligible for a 50% credit toward the cost of health care coverage even if the business already qualifies for the tax exemption. This credit would be phased out as average employee compensation increased from $20,000 to $40,000, and then as the number of employees increased from 10 to 25. The credit would not apply toward insurance for employees whose compensation exceeded $80,000 and would be treated as part of the general business credit, making it non-refundable and available only to businesses with a tax liability. However, the tax credit is of limited value due to its current structure. The average wage of full-time employees at businesses with fewer than 10 employees is more than $30,000, meaning that in many cases, the value of the credit is already cut in half.
For a complete summary of the proposed mandate, payroll tax penalties and tax credits outlined in H.R. 3200, read AGC's Facts about the Proposed Health Care Reform Legislation. To easily contact your congressman with your company's concerns about H.R. 3200, visit AGC's Legislative Action Center today.
* This is the first of several articles in AGC's Health Care Reform series.
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