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Health care reform and the general contractor

Donnie Elkins
Tuesday, Apr 2, 2013

This article is intended to give a very brief overview of the current health care reform going on in this country as it relates to a general contractor. Much material has been written about current health care reform and its impending impact on society in general. One is encouraged to speak with their insurance carrier to find out the particulars relating to his or her personal situation.

In general, contractors who work on projects that are publicly-funded are already subject to what can seem like a myriad of regulations. Among these are the Davis-Bacon Act, OSHA and DOT regulations, and local prevailing wage ordinance requirements. Now the Affordable Care Act (ACA), also known as “Obamacare,” may be adding more complications for companies to deal with, including the possibility of penalties for noncompliance.

Some questions to consider are:

Does the Affordable Care Act apply to me?

Yes, it’s the law and it applies to everyone. For instance, beginning in 2014, large employers with 50 or more full-time employees are required to provide health insurance to their workers or face fines which can range from $2,000 to $3,000 per employee. Small employers, on the other hand, may be at a competitive disadvantage when they bid on jobs against companies who are mandated to provide health insurance (and have reduced their payroll costs as a result) if their employees aren’t covered.

What happens when you win the next job and need to hire additional employees?

The result may be that you end up scrambling to put coverage in place when you have to hire that 50th full-time employee.

As for individuals, beginning in 2014, all will be required to have health insurance. Those who do not have health insurance will be penalized, and these penalties will be included on their personal tax returns (why do you think the federal government is hiring all those IRS agents?). Coverage can be provided with pre-tax money (pre-FICA and income tax) by your company but employees who are not covered at work must be underwritten on their own and may pay higher rates with their after-tax dollars. Most employees would prefer to purchase coverage from their employers rather than figuring it out on their own.

By offering a plan, business owners can establish pre-tax accounts, achieve stronger purchasing power and simplify the process for their employees.

Is my current plan compliant?

If you are already offering health insurance, then you are ahead of the game. However, the coverage your company offers needs to meet minimum requirements to be in compliance with “Obamacare.” The minimum standards should address the following:

• The “Minimum Value” standard: The employer plan must pay 60 percent of costs.

• The “Affordability” standard: Contributions by employees must not exceed 9.5 percent of the employee’s W-2 income.

Contractors who do not currently offer health insurance for their workers and are subject to “Obamacare” may need to take steps to find coverage now. Waiting to find coverage may make it difficult and expensive to procure.

What if I reduce my employees to part-time status?

Employers, thinking it will save them money, may consider this strategy as a way to avoid having to comply with “Obamacare” requirements. However, doing so may backfire on them. Employees who are willing to work on part-time status may not be as skilled and may cost the company money in the long run if they make mistakes or miss deadlines. In addition, the short- and long-term impact of this decision could affect employee morale and your company’s reputation.

Logically, audits for compliance with health care reform will not be far away and that failure to comply may prompt investigators to take a closer look at compliance with other laws.

Providing health insurance coverage for your workers is a good thing to do. It protects your workers, reduces your payroll burden and helps you avoid potential penalties.

Donnie Elkins is the president of Elk Mountain Construction Co., located at 1950 N. Willow Ave., Cookeville. He can be reached at (931) 372-7424 or at

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