This is from Alison Manno at Health eFX:
You have read the statute (maybe not in its entirety), welcomed the delay in the employer mandate, and determined you have a significant variable employee population (meaning an hourly or non-exempt workforce without a set weekly schedule). It’s time now to strategically plan for 2015. One of the first steps is to design and implement your organization’s measurement and stability periods. Here are the steps:
- Choose your organization’s measurement period(s) length.*
- Choose your organization’s stability period length.**
- Determine your organization’s administrative period length.*** (Note: The measurement period + the administrative period may not be longer than 13 and a fraction of a month [date of hire until the first day of a calendar month equals a fraction of a month].)
- Calculate.****
- Perform the same steps for classes with different periods.
- Repeat at the end of each stability period.
* When choosing a measurement period, most employers will undoubtedly want a 12-month look-back. Why? A longer period is administratively ... [less] burdensome. Also, longer measurement periods often lead to lower average weekly hours and level out periods of high volume and scheduling such as holidays and clearance sales. A 12-month measurement gives the employer an opportunity to manage the workforce in terms of scheduling if the trend is higher average hours. (Remember, however, that a 12-month measurement will require a 12-month stability, thereby having the enrolled population on plan without disruption for a longer period of time.)
It is possible to choose a measurement period with a shorter length. Many variable employees fluctuate above and below 30 hours on a frequent basis. Measuring over a shorter period of time will account for this fluctuation more aggressively. Also, since the stability period must match, employers may want to minimize the amount of time that employees are offered insurance. (Remember, at the end of each stability period, the measurement must be repeated.) Based on organization need, some employers may only want to offer employees health coverage during periods of high work hours and not low, so this would be an effective tool to manage this strategy. It also allows the employer to manage benefits costs with industry-relevant time periods; for example, school semesters in the education area, tax time for accounting individuals and tax preparation service providers, and harvest time for the farming and food industry.
**The chosen stability period length should align with the organization’s medical plan or health insurance annual open enrollment and plan year. This will ease the administrative burden and become part of the process in preparing for the enrollment season. It will also ensure cost projections are in line based on trending and current eligible population and any premium cost increases or decreases at the Exchange level.
***The administrative period must be no more than 90 days (for any employee that is non-measureable), so depending on the measurement period chosen, the administrative period will likely be between 30 and 60 days. If an administrative period is not put into effect, the company will likely see a large amount of retro enrollments and need to collect back premiums as employees will have no time to assess their options before their effective dates. One thing to be aware of: administrative periods are in days, not months. So, depending on how it falls, your systems must be able to adhere to the calendar month. For example, an administrative period from October to December is actually 92 days, which is not allowed under the ACA.
****Once the periods are chosen, all systems are go, and data collection to assess service hours over the measurement period can begin. The ability to accumulate the data and ensure this is properly managed, maintained, and fed to the benefits administrator or in-house system is key to the success of using this methodology. If an organization is unable to do this and is overwhelmed with spreadsheets and the need to hire additional staff to manually analyze the data on a regular basis, the risk may be too high to manage a variable hour safe harbor. An organization must be able to defend its position on FT classification and have the audit trail to back up any claims because the penalties are high for non-compliance.
