You know the difference between full and part-time employees, but do you know the ACA and health insurance risk of not managing employee status? It starts innocently enough – a part-time employee picks up shifts and you find out that their supervisor moved them to full-time three months ago, but the employee wasn’t offered coverage. Months later, the employee becomes ill with a serious health condition and files a claim. The employer goes to the insurance carrier and requests the employee be retroactively enrolled, but the carrier denies the enrollment. Additionally, since the employee should have been offered coverage, there are ACA non-compliance penalties. As a result, may be subject to and at risk of Affordable Care Act (ACA) penalties and have to cover the cost of the claims.
Conversely, if you’re insuring a full-time employee who is working part-time hours, as an employer you are paying for benefits when you should not. Furthermore, the insurance carrier may deny the claims if you violate insurance contracts, because the employee is classified as an employee status that doesn’t qualify for insurance.
Employers with variable hour employees should be aware of differences in employee status change compliance rules and best practices, as incorrect employee classifications can have significant financial and compliance implications.
A variable hour employee is an employee who, upon hiring, the employer is unable to determine if the employee will consistently work on average 30 hours or more per week. For employees providing senior and disability care, this is often determined by the employee’s bi-weekly schedule and in particular if they are regularly scheduled to work 30 hours or more per week.
Facilities offering home care, skilled nursing, senior housing, assisted living, disability services, and long-term care often are at heightened risk for employee status errors and issues.
Employee status refers to the type of implied or written contract between the employer and employee, i.e., full-time employment, part-time employment, temporary or contract employment, or an internship or apprenticeship. Employee status should be tracked closely in HR systems. Employee status and eligibility rules should be disclosed in the employee handbook and to the insurance carrier. Risk occurs when employee/employer understanding of status, status disclosed in the employee handbook as well as to the insurance company, and status in systems are not aligned. Let’s review the following example:
A full-time employee who was hired two years ago has been enrolled in a medical plan with the company since they became eligible. Two months ago, the employee dropped to part-time status, and coverage was automatically canceled with no offer of continuance to the employee because the employee status changed to part-time and they are seemingly ineligible for health coverage. However, the employee is likely still in their stability period under ACA regulations. The employer may be subject to an ACA non-compliance penalty.
If the employer has not abided by the guardrails associated with the full-time definition, the carrier can deny the claim. This is vital to get right for your employees and compliance obligations.
Let’s explore the details and differences between part-time vs. full-time employee status.
Standard Employee Status
There are three standard employee statuses:
- Part-time employees – works fewer than 30 hours per week regularly. Typically, part-time employees aren’t offered health and welfare benefits.
- Full-time employees – works 30 or more hours per week regularly. ACA requirements require that health benefits are offered to full-time employees. The employer decides the definition of benefits for paid time off, holiday pay, bereavement leave, and eligibility and can be more specific, such as 40 hours per week. Other benefits must be defined in the employee handbook if the status is different from the health benefits eligibility.
- On-call (or variable hour employees) – do not have a consistent schedule and work varied hours, often associated with seasonal work or students. These employees are not typically offered any benefits.
Benefits solutions are often complex, which is why we work closely with clients to create and administer different benefit processes and systems that offer flexibility to employers while remaining compliant, reducing risk, saving costs, and ultimately, offering a great experience for employees.
Risks Associated with Using the Wrong Employee Status
Beyond ACA risks of incorrect employee status management, there are other risks for employers if their part-time or on-call employees are working full-time hours and are not offered the benefits associated with full-time employee status – or vice versa. Risks include:
- Potential fines per Affordable Care Act (ACA) guidelines: Employers that do not offer ACA-eligible employees coverage may be subject to penalties for violating Employer Shared Responsibility Provisions including the “no coverage penalty” or the “affordability penalty.” Large employers should provide coverage that is affordable and of minimum value.
- Potential denial of high-cost claims: As mentioned, if there’s a high-cost claim that’s audited, and the insurance carrier discovers that the employee doesn’t meet the definition of benefits eligibility the employee can be denied coverage and the employer/employee may be subject to the cost of the claim
- Potential Department of Labor (DOL) claim: If an employee is upset that they were not offered coverage promptly by their employer and they should have based on hours worked, the employer is at risk of fines from the Department of Labor.
How to Mitigate Your Employee Status Risk
You need to have a status change process in place and training for managers and supervisors. When schedules are made, are your managers double-checking that part-time employees are not going above their employee status? When an employee’s status changes, do you have a process for communicating to the employee about their options?
At Procare HR, we help care providers navigate and avoid employee status change management risks. Simply put, we help you get it right, all to support you, your organization, and your workforce. We do this by conducting monthly audits for every client and bringing any concerns to your attention so they can be addressed and corrected.
Procare HR is here to guide you through health and welfare benefits. We’re looking out for you, so you can keep your focus on what matters most – delivering care. Let’s connect!