The Affordable Care Act Defines Full-Time Employment

As provisions of the Patient Protection and Affordable Care Act (ACA) continue to take effect, there is considerable friction over the ACA’s definition of a “full-time employee” and its implications for providing health coverage to those employees. The Fair Labor Standards Act defers to employers to define full-time employment; however, the ACA bases its definition of full-time employment on the Internal Revenue Code of 1986: “an employee who is employed on average at least 30 hours of service per week”.

Such a designation, opponents argue, may cause employers to choose between providing healthcare to a greater number of employees and cutting full-time employees’ weekly hours by at least 25 per cent to force them below the full-time threshold. Senator Susan Collins (R-ME) has introduced the “Forty Hours Is Full Time Act of 2013” on two separate occasions in an attempt to revise the IRC and, by extension, the ACA. Economist Casey Mulligan argues in The New York Times, however, that passage of such a law would actually cause more employers to cut their employees’ hours and result in more of a taxpayer burden.

According to Mulligan, it is easier for an employer to cut an employee’s hours from, say, 45 to 39 without drastically affecting the work schedule. Projections of employer cost between full-time, part-time at <30 hours and part-time at <40 hours show that the difference in a 39-hour work week and a 40-hour work week is almost negligible for employers; meanwhile, the employee becomes eligible for ACA tax incentives to purchase private insurance on the marketplace – costing the taxpayer more – and ends up with an increase in take-home pay at the same time.

The arguments above suggest that business owners need not shy away from expanding or offering full-time benefits to their employees in an attempt to cut costs; rather, service providers in medical industries may find themselves at an advantage. After all, some facilities will choose to scale back their in-house staff and rely on outside contracts, leaving a great opening for vendors to expand their own businesses.

Healthcare factoring can help those companies close the gap between their own cash flow and expenses, and ease the strain of expansion by providing the capital to cover increased overhead. Find out how PRN Funding’s accounts receivable factoring program can be tailored to your company’s needs.