Affordable Care Act - the Virginia Municipal League

ActBy Jessica RogersAs local governmentsplan their operations fornext fiscal year, many arestruggling to understandexactly how the AffordableCare Act (ACA) will affecttheir operations. In short,some of the effects of thenew healthcare law arerelatively easy to decipherwhile others are murkier.First, the known: Anyemployer with 50 or moreemployees (or the equivalent thereof),will have to either provide affordablehealth care to all full-time employeesor pay a penalty. This includes localgovernments. Since either option willcost money, local governments need tocalculate how much they will need toinclude in their budgets. So, how canlocal governments do so?Employer sizeFirst, every locality must knowhow many full-time employees it has.The number of employees determineswhether or not an employer is subject tothe act’s shared responsibility requirements(50 or more and you get tocomply). Localities that qualify as largeemployers will need to either (i) offerhealth care coverage to all full-timeemployees, or (ii) pay a penalty.A full-time employee is anyone whoworks at least 30 hours a week, on average,for at least four months of the year(at least for purposes of determiningemployer size). Part-time employees’collective hours are divided by 120 eachmonth, to give the number of full-timeequivalent positions. If the full-timeemployees plus the full-time equivalentsare 50 or more, you’re in the game, soto speak.So who are employees of thelocality? Here’s where things start toget tricky. Some are obvious: the citymanager, town manager or countyadministrator, and the accompanyingsupport staff. But what about employeesof the local sheriff ’s department,or the local social services department?What if your locality has a joint EMSagency with a neighboring locality? Arelocal school division employees alsoemployees of the locality? This bringsus to the realm of the unknown.The act says that anyone treatedas a single employer under § 414(b),(c),(m),or (o) of the Internal RevenueCode (IRC) will be treated as oneemployer, for purposes of determiningemployer size. In the most basic terms,IRC § 414 groups together entitiesthat are under common ownershipand control. Historically, this sectionapplies to ERISA plans. Since ERISAdoes not apply to local governments,these definitions aren’t generally appliedto government entities. In otherwords, we don’t have many examplesto follow.Since local governments are not“owned,” we don’t know how thisrequirement will be interpreted in thiscontext. Proposed regulations tell usthat further guidance on applying thesedefinitions to government entities isforthcoming. In the meantime, localgovernments will not be penalized for agood faith interpretation of the statute.In other words, make a good faith judgmentas to who should be included, andwait for further instructions.While we don’t know how theownership requirement will be applied,localities can start thinking about howmuch control they have over variousrelated entities, including the schoolsand the constitutional officers, inmaking a good faith interpretation ofthis rule.For example, neither the schoolsnor the local constitutional officersare under the control of localities inVirginia. Both have constitutional autonomy,which is a good argument forlack of control. Compare that to thelocal boards of social services, whichby law, are appointed by the locality.That sounds like a lot of control. Fornow, any decisions localities makeabout these various groups are unlikelyto lead to penalties. Thus far, any newguidance under the act has come withample time for compliance. But thisis one issue that should be on everylocality’s radar, until further guidanceis released.For any locality that determines it issafely under the 50-employee threshold,penalties for not offering coveragewill not apply, but there are severalreporting requirements applicable toall employers that must be compliedwith. For those with 50 or more, thereare more decisions to be made.Virginia Town & City | april 2013 9