Senior Living Mulls ‘Pay or Play’ in 2014 Ahead of ACA’s Employer Mandate

The postponed implementation of the Affordable Care Act’s provision for employer-sponsored health insurance has given senior living providers an extra year to figure out their coverage plan and staffing strategy—time that can’t be wasted, industry stakeholders say.

Originally slated to take effect in January 2014, the ACA’s “employer mandate/employer penalty” was delayed until 2015. It requires all businesses with more than 50 full-time equivalent employees (FTEs) to provide health insurance for their full-time employees, or else pay a monthly “Employer Shared Responsibility Payment”—aka penalty—on their federal tax return.

“Full-time equivalent” refers to the total number of full-time employees working 30 or more hours per week, plus the combined number of part-time employee hours divided by 30, but not counting seasonal employees, contractors, and business owners.


Preparing for compliance is important, senior living employers say, considering companies that opt not to offer insurance will be charged $2,000 per employee after the first 30 full-time employees.

Strategies for Coverage

Heading into 2014, the first issue senior living employers should tackle is determining if they have more than 50 FTEs, says Lisa Welshhons, SPHR, president of Merit Senior Living. The next thing, she says, is deciding whether they’re going to “pay or play” for those employees.


“There are a few different strategies, including continue to offer healthcare coverage; don’t offer it and pay a penalty; continue to offer it, but hire more part-time workers and reduce the number of FTEs that are subject to the employer mandate,” Welshhons says. “Every business has to make a case based on its situation.”

More than half (51%) of employers polled for a 2012 Mercer survey that don’t currently offer coverage to employees who work 30 or more hours indicated plans to modify staffing to include more part-time workers.

While some may be tempted to increase their part-time staff to avoid triggering the mandate, this strategy won’t necessarily save money in the end, Welshhons cautions.

“It’s the same [in other industries] when hiring more part-time people: Turnover among part-time is historically greater than among full-time, and at the end of the day that impacts residents [in terms of satisfaction] as a soft cost, along with the hard costs of hiring new people and training them,” she says.

Others may be tempted to drop coverage altogether and pay the penalty, offering raises to employees instead that would allow them to buy their own insurance. But this route is liable to cost more money than just the penalty, says Welshhons, when factoring in increased payroll taxes on a higher salary and higher workers comp premiums. Additionally, those who don’t offer insurance are more likely to see higher turnover rates.

Some senior living companies are considering a different route altogether.

“We’re exploring the concept of a private exchange in 2014 to offer to our employees,” says Mark Heston, senior vice president and director of human resources at LCS, a family of companies including senior living and CCRC management, development, marketing, consulting, and other related services.

Because the Des Moines, Iowa-based company already offers health insurance coverage, Heston says it doesn’t believe the ACA will represent a huge change aside from the new reporting requirements for FTEs. A private exchange, he says, would allow LCS to provide more flexibility to employees to choose what they need.

Staff Scheduling 

Perhaps the most important aspect of all to figure out, providers and industry stakeholders agree, is the rule pertaining to full-time equivalents. Some of the biggest issues will be around scheduling, predicts Mark Woodka, CEO of OnShift, and senior living providers will have to get better at managing staffing.

Senior living is particularly vulnerable to penalties under the law considering the nature of the industry, with high staff turnover and prevalence of part-time staff who may pick up extra shifts on a regular basis, he says.

“We’re in a situation where turnover is already high, and we know staffing is a determining factor of resident satisfaction and quality of care,” says Woodka. “We’re going to see more providers moving to having larger part-time staffs.”

Managing FTEs may be particularly tricky as an employee could work just 20 hours one week, but 40 the next because a fellow worker is on vacation or called out. The ACA allows for a “lookback” period allowing employers to track variable hour employees and determine their average hours worked during that period.

“One of the biggest costs—although it’s still unknown—is how much it’s going to cost the employer to track employees,” Welsshons says.

OnShift has introduced a new capability to its scheduling software that notifies schedulers when workers reach a certain threshold of hours. For example, a scheduler would get a warning if they try to give an additional shift to a part-time employee who is already scheduled for 28 hours.

Anywhere from 80-85% of senior living communities still have a paper-based scheduling system that won’t automatically generate alerts when a part-timer approaches a threshold, Woodka estimates.

“If I was giving advice to people, I’d say, ‘Get ready. Get started, get going,'” he says. “Build the right staffing strategy, and understand the risks of not having one.”

Preparing for 2015

LCS will be utilizing the 12-month look-back in 2014 to determine its FTEs and then decide whether it makes sense to decrease or increase hours for those hovering at the full-time threshold.

“We know we have to monitor and arrange that,” says Heston. “We shouldn’t have a lot of people working [only] 31 hours; we need to make sure we’re managing our workforce effectively so if someone is going to qualify for coverage, it’s efficient.”

ESLP Management, which operates a Denver senior living community, also provides consulting services for other retirement communities and is recommending a strategic look at part-time versus full-time workers and how it impacts schedule and retention.

“The senior housing industry is sensitive to this, and we’re encouraging people to do what we’ve done: Get a coverage plan that will help retain employees over time,” says Terry Frisby, senior vice president of human resources at ESLP Management. “Two years ago we put together a plan and had it tested to make sure it qualified under the ACA’s standards, and we have educated, educated, educated. We want to make sure our employees know their options.”

His company works mainly with CCRCs and assisted living communities, and Frisby says his sense is that CCRCs tend to be more prepared for the 2015 employer mandate implementation. Overall, though, he believes the industry—like ESLP Management’s owned community—will be ready.

“We feel pretty comfortable that we’ve prepared ourselves well,” Heston says. “But as with any change, you’re never 100% sure. We believe we’ve done the things necessary we’ve needed to do to prepare. Now that [the implementation] got pushed off a year, we can step back and make sure it’s still a good plan. With the ACA, there’s new guidance coming out almost on a weekly basis.”

However, there is ongoing, general confusion related to healthcare reform as new guidance is released.

“Based on my interactions with different senior living communities, I don’t believe they really have a handle on the administrative portion of the employer mandate,” Welshhons says. “I don’t know if anyone has a real good handle on it, because it’s not real clear, and I think it’s going to catch a lot of people off guard.”

Written by Alyssa Gerace

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