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Wage Pricing for the Affordable Care Act


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Has anyone discovered any guidance on how the DOL's Wage Determinations will be affected by the Affordable Care Act?

It would seem that, since employer contributions toward group health care premiums would become mandated under ACA, those contributions would no longer be eligible to count toward the H&W component of fringe benefit minimums.

If the DOL issues guidance -- and maybe, even if it doesn't, e.g., if this is simply a matter of law -- that, effective Jan. 1, 2014, employer contributions toward healthcare plans may not be considered part of the H&W component of WDs, it seems like contractors get slammed twice. On the one hand, the ACA will require many contractors to increase their costs for employer-sponsored healthcare benefits, and on the other hand, any benefits they provide will now be excluded from the H&W contribution calculation, such that employers now will have to pay more toward other fringe benefits.

If this is the case, would the employer contributions to healthcare plans be considered as part of the base labor WDs? So if the WD base labor minimum is, say, $25, and the employer contributes $5 to a healthcare plan, could contractors pay out only $20?

Also, if anyone has heard anything from any federal agencies about whether they will agree to modifications or other adjustments for federally mandated increases in benefit payouts to contract employees under the ACA (under, e.g., FFP contracts), your input would be greatly appreciated. Without some kind of assurance from the federal agencies, or a specific contract provision for increased costs caused by changes in the law, I think the 52.222-43 price adjustments will be a total mess, since the DOL WD data is always a year behind, if not more, considering WDs don't get incorporated until the next renewal period.

I'm wondering how many contractors will feel the need to escalate wages in spite of the intent of -43 simply because revisions to DOL WDs may not be timely or sufficiently large enough to cover costs of ACA compliance.

Thanks!

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My opinion is that the Health Insurance Premium, whether or not mandated by the PPACA, is a component of the H&W Benefit, and that if a company does not provide coverage, opting to pay a penaly, they would still need to provide the $3.71 H&W Benefit per hour (cash in lieu of)

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My opinion is that the Health Insurance Premium, whether or not mandated by the PPACA, is a component of the H&W Benefit, and that if a company does not provide coverage, opting to pay a penaly, they would still need to provide the $3.71 H&W Benefit per hour (cash in lieu of)

That would seem contrary to how the DOL has issued WDs in connection with Hawaii's mandated employer health care law. This excerpt is from the June 11, 2012 memo regarding WD revisions for last year:

Wage Determination for the State of Hawaii

Under Section 2(a) (2) of the SCA, fringe benefit payments that are required by state law may not be used to satisfy the employers' fringe benefit obligations.
In Hawaii, most employers are required by law to provide health insurance coverage for their employees.
Therefore, employer contributions that are made to satisfy the employers' obligations under the Hawaii mandated prepaid Health Care Act may not be credited toward meeting the contractor's obligations under SCA.
The SCA WDs have addressed this issue in the past by excluding the health insurance portion.

Consistent with past practice, and in recognition of the fact that Hawaii law requires employers to provide health care coverage for most employees,
the SCA WDs for Hawaii will continue to exclude the health insurance portion on the benefits for all employees on whose behalf the employer provides benefits pursuant to the Health Care Act.
All employers, however, are not required to make, and in fact do not make, contributions for certain employees under Hawaii law. If this is the case, then the reduced fringe benefit level is not appropriate for these employees.

Therefore, effective
June 17, 2012
, the SCA health and welfare fringe benefits level for Hawaii will be $1.50 per hour, or $60.00 per week, or $260.00 per month for all employees on whose behalf the contractor provides health care benefits pursuant to the Hawaii Health Care Act.
For those employees not receiving mandated health care benefits, the new health and welfare amount will be $3.71 per hour.

For what it's worth, SCA Section 2(a)(2), codified at 41 USC 351, states the following:

Such fringe benefits shall include medical or hospital care
, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing, unemployment benefits, life insurance, disability and sickness insurance, accident insurance, vacation and holiday pay, costs of apprenticeship or other similar programs
and other bona fide fringe benefits
not otherwise required by Federal, State, or local law to be provided by the contractor
or subcontractor.

However, you are probably right about employers who don't provide healthcare coverage -- as in Hawaii, employees who don't receive the mandated coverage would still be entitled to the $3.71.

But what if an employer does provide health care coverage? It seems like that coverage amount would be excluded from the H&W/fringe calculation if that coverage is mandated by law. . .

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However, the question is does the ACA require employers to provide insurance coverage? The statute says employers must provide a minimum level of coverage and if they don't, they pay a penalty (tax). To me, it seems the insurance coverage is optional, not mandatory.

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Right. That is why they pay $2.21 an hour less benefits than the employer who is not providing coverage.

Do you know if the employer-provided health care coverage can then be calculated to be part of the "wage" in hawaii? So, if the minimum wage is $20/hr, can an employer pay $5/hr. toward health benefits and pay an actual cash wage of $15/hr to meet that minimum?

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However, the question is does the ACA require employers to provide insurance coverage? The statute says employers must provide a minimum level of coverage and if they don't, they pay a penalty (tax). To me, it seems the insurance coverage is optional, not mandatory.

Yeah, this may be the interpretation the DOL uses. But I can also see it going the other way. The ACA's coverage/benefits aspect is frequently referred to as a "mandate." Though it may appear to be an "option," it's not really a free choice if there's a penalty for non-compliance. I mean, you can commit a crime if you want -- it's your option -- but there's a penalty if you do! I would think you are "required" to obey the law, even if you have the option of breaking the law and incurring a penalty. I think, to me at least, it seems like the ACA mandate for employer provided health care benefits seems like a requirement, which, if violated, imposes a penalty (albeit a penalty that is somewhat modest, enough that some employers would prefer the penalty over complying with the mandate).

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The ACA is confusing as to the nature of the payment that the employer has to make if it does not provide the level of insurance coverage called for by the Act. While the law sometimes refers to it as a penalty, it is usually called a tax. This distinction can have other consequences for contractors. While we can speculate about the nature of the health insurance coverage required by ACA, before we can speak in an informed way on this, we need to wait for HHS, DoL and IRS to issue their final regs and for the certain litigation that is to follow to play out before we really know what what it means.

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