Affordable Care Act Causing Concern for Fire Departments

In discussing historic healthcare legislation on March 10, 2010, former House Speaker, Rep. Nancy Pelosi (D-Calif.) stated, "But we have to pass the bill so that we can find out what is in it."

Thirteen days later, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA). It's taken three years to analyze it and find out what's in the bill. In fact, the Internal Revenue Service (IRS) is expected to release the final regulations implementing the PPACA by September 30. While the final details have not been settled, fire departments should start to consider the effects that the PPACA may have on them in regards to health insurance, staffing levels and the use of part-time and volunteer personnel.

Who's an Employer and Who's an Employee?

PPACA requires large employers, defined as an employer with 50 or more full-time employees, to provide health insurance to those employees. The PPACA defines full-time as someone working an average of 30 hours or more per week.

Insurance plans for these employees must be qualified, meaning they include "essential benefits," the employees' contributions can't exceed 9.5% of their household incomes, and the plan must cover at least 60% of healthcare expenses. A list of essential health benefits can be found on the HealthCare.gov website.

The PPACA further states that part-time personnel must be counted as partial full-time employees for the purposes of determining if someone is a large employer. Based on the IRS’ designation of volunteer firefighters who receive Form W-2 as employees, the IAFC believes that volunteer firefighters who receive compensation also will be considered employees under the PPACA. The IAFC is waiting for the IRS’ final regulations, which are expected to be released by September 30, to confirm this fact. For example, two part-time firefighters or volunteers who each average 15 hours of work per week equal one full-time employee for the purposes of determining whether an employer meets the 50-fulltime-employee threshold.

When deciding if someone qualifies as a full-time employee, the IRS, which is overseeing implementation of the PPACA, will allow employers to choose a measurement period, which is a three- to twelve-month time span, to calculate the employee's average number of hours per week. While there is flexibility in choosing the measurement period, the same period must generally be used for all employees.

For the fire service, employer generally means a government entity such as a city, town, county or fire district. In these cases, the IRS would consider all city employees (i.e., fire and EMS, parks, sanitation, etc.) in determining the 50-employee threshold.

For fire departments not formally associated with a government entity, such as an independent or incorporated volunteer or combination fire department, the departments itself would be considered the employer.

Let's see how different fire departments would be treated, based on the number of employees according to type:

Penalties for Noncompliance

If the IRS determines a large employer isn't offering either insurance or "qualified" insurance, they'll be assessed a monthly penalty until all full-time employees receive qualified insurance. Departments not offering insurance will be fined at a monthly rate of $166.67 per full-time employee, excluding the first 30 full-time employees. For departments offering unqualified insurance, the IRS will assess the lesser of two monthly penalties: $250 per full-time employee receiving an insurance subsidy due or $166.67 per full time employee in the organization, excluding the first 30 full-time employees.

To understand this, let's look at this chart:

Notification Requirement

Lastly, PPACA requires employers to notify their employees by October 1, 2013, about their options for health insurance. The Department of Labor created model notices employers can use when notifying their employees of their coverage options. Model notices (as PDFs) are available on the Employee Benefits Security Administration website for employers who are not offering insurance plans (PDF) and for employers who are offering insurance plans (PDF).

Conclusion

PPACA will be a game changer for American healthcare, and fire departments of all types may feel its impact. The full reach of PPACA won't be known until the IRS finalizes its PPACA regulations later this year, so keep watching for future articles from the IAFC on the PPACA. You can also find information at IAFC.org/GR.

In the meantime, check with your benefits administrator to get a better idea of how PPACA may impact your specific department.