Recreational Marijuana and the Employer- Ballot Measure 91 Passed. Now What?

On November 4, 2014 Ballot Measure 91 was voted into law which allows recreational marijuana to be sold to adults that are 21 and older.   The passage of Measure 91 means that at the state level, in many instances, marijuana will no longer be illegal to use or possess. Now that it is being made legal, what do you do as an employer? 

Background: Should you still drug test? 

In many ways we are revisiting questions from 1998 when Oregon became the second state to legalize the use of medical marijuana with the passage of Ballot Measure 67.  Eventually the Oregon Bureau of Labor and Industries (BOLI) took a stance that essentially said voters wanted Oregonians to have access to medical marijuana and therefore employers should not discriminate against them based on the medicine they are legally taking under Oregon law.  (I should note that this is my own interpretation from my correspondence with the Labor Commissioner.)  My concern at the time was employers were unable to objectively conclude that an employee was under the influence of medical marijuana while working.  If someone is consuming alcohol a breathalyzer can determine what level of alcohol is currently in their bloodstream.  There is no breathalyzer test available to employers for THC and employers cannot do a blood test on employees.  Your only option is a passive test like a urinalysis.   A urinalysis shows what drugs an employee had or had not used in the past and does not determine if they are currently impaired for the drug that they have tested positive for.  This left the employer in the position choosing to err on the side of safety or ignore drug test results to avoid a potential wrongful termination suit.  This impasse was resolved when the case, Emerald Steel Fabricators vs BOLI was heard by the Oregon Supreme Court.  Essentially the Oregon Supreme Court concluded that since marijuana is a controlled substance under federal law that employers do not have to accommodate the use of an illegal substance (click here for a link to that decision).  With Measure 91’s passage it is likely that employers can rely on this decision to apply to recreation marijuana in the near future.  Additionally Measure 91 states that, “…this Act may not be construed: (1) To amend or affect in any way any state or federal law pertaining to employment matters.”  Stay tuned to Cardinal’s newsletters and we will advise you if there are any updates on the Federal Controlled Substance Act or BOLI’s position on employee use of recreational marijuana.

Should the employer rely only the Oregon Supreme Court’s decision that marijuana is a federally controlled substance?

In my letter to BOLI on medical marijuana my focus was on safety.  I believe this is still the best angle to approach this issue.  Employers have an obligation to provide a safe workplace (feel free to verify this with OSHA) which includes making sure your employees do not hurt themselves or others because they are impaired while working. Let’s look at two positions, a clerical employee and a forklift driver, to illustrate when you should apply drug testing.  In this example we assume the clerical employee never drives for work and a forklift driver works at a mill in close proximity to coworkers.  The clerical employee has a very limited ability to hurt themselves or others and thus does not need extra resources directed towards drug testing.  In fact, chronic use of marijuana (or any intoxicating substance) is going to be reflected in job performance and can be dealt with in that manner. A forklift operator can not only hurt themselves but also drives around with heavy loads balanced on forks that can hurt or kill others.  An employer without a drug policy and drug testing in place for the forklift driver exposes themselves to OSHA fines, increased workers’ compensation or general liability costs and even a potential civil suit from an injured coworker.

Who should you drug test?

Deciding which job classifications you are going to test are not going to be as easy as the examples provided.   When deciding what to do focus on the potential of employees to hurt themselves or others, the general public or even machinery or product.  Briefly document what you decide. 

What about drug testing still required by Federal law?

There are some jobs that require drug testing.   For example, truck drivers that fall under the Federal Department of Transportation rules should still follow those drug testing requirements.

When should I make changes?

Measure 91 does not go into effect immediately upon passage but on July 1, 2015.  But you should be working on your response to the change in the law before that date.

Do I have to accommodate use at work?

The short answer is no.  However if you terminate an employee for use at work you should protect yourself with an employee handbook with a drug and alcohol policy.  

Which drug tests are affected?  We do random, post-accident, pre-employment and reasonable suspicion testing?

Some, all or none may be affected depending what you decide to do for testing.  Once you make a decision on the need for which types of drug testing in which positions, be sure to document and enforce that policy across the board in like positions.

Arin J. Carmack

Risk Management

Oregon Health Exchange - Open Enrollment begins on November 15, 2014

Open enrollment for individuals begins on November 15, 2014 and is open until February 15, 2015.  During open enrollment individuals may buy a health insurance plan from the exchange for the first time or shop around for a different plan. Once purchased, the new plan can go into effect in as little as 30 days. In reviewing the CoverOregon.com website it appears that individuals shopping for private health plans will go to the CoverOregon website to make sure that they qualify for a non-employer plan.  If they do qualify they will be directed to the Federal exchange website, HealthCare.gov, to see if they qualify for a subsidy, shop for a plan and to purchase coverage. 

Small businesses, like all businesses, do not have to wait for open enrollment to shop for coverage.  But the beginning of the New Year might be a good time to evaluate you and your employee's options. Prices on plans in the exchange were released in July (see my article here).  Overall, prices seem to have gravitated lower and towards the center even though carriers presumably did not have enough data to make a change actuarially.  The new pricing might be an opportunity to save money or find a better fit but keep in mind how your decisions can impact your employees. For example, is it better for you to offer a small group plan or better for your employee to use the exchange and get a subsidy? An employee making $11.00 per hour, is 35 and does not smoke could obtain a $1789 subsidy for him or herself in the exchange while coverage would cost $1300.  Remember, if you offer a health care plan your employees will not qualify for a subsidy in the exchange.  Thus if an employer pays 50% of the premium then health insurance would cost the employee $244 more per year for the same coverage.  If you want to review different scenarios here is a link to an online subsidy estimator in which you can enter your employee’s annual income and obtain an estimated subsidy.

Many of the small business owners I interact with are very concerned about their employee’s overall welfare. But finding out what is best for you and your employees may be difficult.  Any conversation may also have the unwelcome effect of learning too much about your employee(s).  You have no business need to learn of any health concerns much less want to be exposed to some type of risk of discrimination because of what you learn. On the other hand small businesses tend to know their employees and this topic may be something they would welcome to provide input on.  For example, an employee may need a gold plan while you want to offer a bronze.  Or you have a young workforce that thinks they are still indestructible and do not want to pay for half of a more expensive gold plan even though you would prefer that option.   Try to keep any conversations focused on what their needs may be not what they need coverage for. Be sure to set expectations in line with what you can afford to offer and fits you and your business needs.

Arin J. Carmack

2015 Health Insurance Rates Released

A recent headline reads, “Average health insurance rates lower in 2015" (see link at the bottom of the page). In aggregate this is great news for all Oregonians that utilize the health insurance exchange, CoverOregon.  One year is not a trend but after years of double digit increases Oregon businesses would welcome rates stabilizing like workers’ compensation did in the 1990s. Oregon is still benefiting from those changes.

 

A closer examination of the approved rates shows some insurers with increases but others with double digit decreases.  This is counter to what I had expected.  The coverage from the health insurance exchange began in 2014.  The following logic was put forth that insurers would have to submit rate changes in the first half of 2014, thus they would not have actuary data to base rate changes.  Unless insurers were able to approximate changes based on the available data another explanation may be a push to gain market share or decrease exposure (decrease market share).  Moda is an interesting example.  They had some of the lowest prices in 2014 but in 2015 there will be significant increases in premium.  Another large carrier, Providence, had similar large decreases.  Overall pricing seems to be converging into a narrower band.

 

An interesting point to note is the pricing between small group and individual plans.  The press release reads, “…the average monthly premium for an individual standard plan [silver plan] for a 40-year-old in Portland in 2015 is estimated at $250, compared to $262 in 2014. For a similar small employer plan, the average 2015 premium is an estimated $308 per month, compared with $327 in 2014.”  That is just under $60 difference for what appears to be the same plan.  One would assume that adverse selection would take place in the individual market driving up prices.  However individual market has a temporary advantage because it enjoys a special reinsurance program.  Carriers are new to the individual exchange market and when faced with unknowns they generally raise prices. Reinsurance allows carriers some peace of mind until they build new actuary models based on actual experience.  This reinsurance program winds down at the end of 2016.

 

Arin J. Carmack

 

Read the News Release here:

http://www.oregon.gov/DCBS/insurance/news/Pages/2014/aug012014.aspx

ACA Strategies

If you have 100 Full Time employees and Full Time Equivalents in 2015 or 50 Full Time employees and Full Time Equivalents in 2016 you will be subject to the $2000 tax/penalty under the Affordable Care Act (ACA) if you do not provide health insurance.  Often the option to pay a tax or provide health insurance is framed as two options-pay or play.  Either you pay the $2000 tax or provide health insurance to your employees.  And many large employers are doing just that, crunching numbers and watching competitors to decide which of the two options they should take.  

 

An employer that has 150 employees resulting in a yearly $200,000 tax there is considerable incentive to minimize their tax. We will look at some of the other options that have been proposed as alternatives to pay or play to reduce or eliminate taxes under the ACA.  At this point I should note that I am not intending to provide legal or tax advice.  These strategies have not been tested and you should really obtain advice from someone that is ‘certified smart’ like a CPA or an attorney.  Nor am I responsible for any bad PR should you implement any of these strategies unsuccessfully.

 

Independent Contractors – Turning your employees into independent contractors. This option comes up every time there is a new cost of having an employee.  An independent contractor does not just avoid the ACA tax but also other costs like workers’ compensation or unemployment taxes.    The problem with this option is that the test of the status of an independent contractor is not clear cut and even varies within different government agencies.  Having dealt with some litigation on this matter I would highly recommend getting legal advice before making any of your employees independent contractors.  I would also note that once an “independent contractor’s” services are no longer needed they often file for unemployment.  The process of obtaining unemployment benefits often begins to unravel the independent contractor status of that firm’s outsourced help.

 

Outsourcing – Speaking of redeploying your workforce and processes, this is one area that may gain some traction.  Employers that want to stay below an arbitrary number, say 50 employees, can outsource some functions.  Examples include payroll, HR or recruitment.  This can provide flexibility for employers that offer increased pay in lieu of health insurance so employees can obtain subsidies for themselves and family on the exchange (link to article).

 

Employee Only Health Insurance – Anecdotally this option is very popular.  Just like the example in the previous paragraph, the availability of health insurance from the employer restricts the ability for the dependents to obtain a subsidy in the health insurance exchange.  And employers generally do not pay for a spouse or children. If the employer restricts the plan to only employees then the rest of the family can apply for a subsidy on the exchange.  

 

Splitting up the Business – When the ACA was first passed I heard talk about splitting up businesses into units smaller than 50 employees.  There are rules on what is called combinability in the ACA and reportedly this is very difficult to do.  When I was asked about this option I referred the employer to an attorney and have yet to see anyone to do this.

 

30 Hour Work Weeks – You may have heard of this possibility in the news.  An employer makes nearly all of their employees part time and thus avoids the $2000 tax. If you offer shifts of less than six hours it has the added benefit of not requiring a lunch break.  On the other hand it is an administrative nightmare by nearly doubling of the number of employees when restricting employees to five 5-hour shifts.  Management would have to monitor employee’s hours to ensure employees do not become full time employees and thus have to offer benefits or pay a penalty. Plus recruitment and retention is negatively affected.  The question employers should ask themselves is if this option is really worth saving about $1.50 per hour on labor?  I have not seen it widely adopted and I suspect that the more likely scenario is that full time employee’s hours will be maximized while part time employees are not allowed to pick up additional shifts.  

 

Minimal Essential Coverage Insurance Plan – To avoid the $2000 tax a large employer has to offer a health insurance plan that provides minimal essential coverage.  That does not mean that the coverage meets the definition of health insurance that is offered on the health insurance exchange.  In fact these plans generally cover considerably less and thus cost considerably less.   The employer pays a significant portion of that plan (which is still much cheaper than providing exchange level health insurance) to ensure that there is at least an initial 70% participation rate.  In order to meet the eventual requirement of a 95% participation rate the employer may have to pay for the entire cost of the premium.  Employees that sign up will not be subject to the individual mandate penalty.   Additionally the employer offers a separate plan that meets the definition of minimal value (coverage levels equivalent to the health insurance exchange) and costs less than 9.5% of employee income.  The employer is counting on fewer employees signing up for the more expensive plan.  The downside to this plan is that employees will not be able to obtain a subsidy in the health insurance exchange as they are being offered an employer plan.  This could create some ill will towards the employer.  On the other hand there are reports of employees specifically requesting this minimal coverage and employers doing so to retain staff.

 

 

Arin J. Carmack

SVP Risk Management

Cardinal Services

Medium Sized Employers and the ACA

 

As we get closer to 2015 employers that are close to 100 employees (or those in 2016 that are close to 50 employees) should to decide if they want to be a large or small employer under the Affordable Care Act.  If you already offer health insurance many parts of this article will not apply to you.  You should however check to be sure that your plan meets the definition of health insurance (ask your agent).

 

As a medium-sized employer, when reviewing your options consider:

1. Will offering coverage make health insurance more expensive to your employees? (See full article here).  Employees that can obtain health insurance from their employer cannot buy health insurance from the exchange and thus qualify for a subsidy.

2. Should you allow spouses and children on your plan?  Many employers do not pay for dependents.  It may be much cheaper for the dependents to obtain coverage from the exchange (see article above).  You may want to restrict coverage to just your employees.

3. Your industry norms.  Some employers are competing against others that will not offer health insurance and their margins are so small that they cannot raise prices enough to cover costs.  On the other hand if your competitors offer health insurance you will have a significant disadvantage when recruiting and retaining employees.

4. Wellness – Health insurance provides a healthier, more productive staff.  Though difficult to quantify this figures into many business owner’s decision making process.

Wellness and the Affordable Care Act

There are plenty of conversations about the rise in health insurance rates.  Politicians on both sides debate the merits of the ACA and its role, or lack of a role, in shaping the direction of health care costs.   Health care providers, insurance companies and malpractice attorneys are just a few of those taking some or all of the blame for rising rates.

One area that deserves more attention but is over looked is the consumer.  A sound risk management practice is to persuade the insured (consumer) to mitigate some of the risk by changing their behavior through positive and negative consequences for losses.  An example of this is higher or lower auto insurance premiums based on traffic citations or accident history. Obviously many medical conditions are out of the control of consumers and no one should not be penalized for congenital conditions.  But there are numerous lifestyle choices, like quitting smoking or exercising, that do make a difference.   Wellness programs are an avenue to provide motivation and encouragement to make better choices.

The ACA has in interesting provision that allows employers to implement a wellness program with group health insurance that costs the employee more if they do not participate.  For example, you can require employees to pay up to 30% of their health insurance premiums if they do not participate. Or you may offer smoking cessation programs worth up to 50% of the health insurance premiums.  The applicability to this in Oregon is likely to be primarily limited to large employers outside of the health insurance exchange.  The Oregon exchange, CoverOregon, rates all small businesses employees in aggregate thus the benefits of one employer enacting a wellness program is extremely limited as it is diffused in the pool.  Large employers in Oregon rated with their loss history will have more of an incentive to control costs.

In the 2014 Oregon legislative session, an interesting wellness bill was submitted.  HB 4072 would have given a tax break of up to $500 per employee for money spent on a wellness program. Oregon’s even numbered years are shortened legislative sessions and this bill appears to have been stuck at in the Revenue committee in the House.  Without commenting on the details of this bill, a tax break that rewards small businesses is an improvement in trying to halt the rise in health insurance costs over the current pooling of risk in the health insurance exchange.

Arin J. Carmack

Wellness Programs:

http://www.dol.gov/ebsa/newsroom/fswellnessprogram.html

http://www.hhs.gov/news/press/2013pres/05/20130529a.html

House Bill 4072:

https://olis.leg.state.or.us/liz/2014R1/Downloads/MeasureDocument/HB4072

https://olis.leg.state.or.us/liz/2014R1/Measures/Overview/HB4072

Legal Update Part II – Federal Changes and Other Trends

At the Federal level there are two big items related to labor law.  The first is in regards to a Supreme Court ruling on the Defense of Marriage Act (DOMA).  The court ruled that benefits must be extended to same sex couples if the state they reside in recognizes same sex marriages.  What is unclear is how that applies in states that do not recognize same sex marriages.  Even more unclear is if a same sex couple gets married in a state that recognizes same sex marriages but lives and works in a state that does not.  Since the ruling on DOMA focuses on benefits, like health insurance or 401(k) plans, you should contact the administrator of those benefits and ask about the criteria they have set.  Then update your employee handbook to match their advice.

The second item at the Federal level is the Affordable Care Act (ACA).  The implementation of various pieces of the ACA has been changing since its inception.  2014 was no exception.  There is a provision of the ACA known as the employer mandate.  The employer mandate applies to employers that have 50 or more full time employees.  If you are a large employer and do not provide health insurance you will be taxed $2000 per full time employee per year (the first 30 are tax exempt). This tax was due to take place in 2014 but enforcement was delayed until 2015.  The recent change is that during 2015 the IRS is not going to enforce the employer mandate against employers with less than 100 employees. This is just a temporary reprieve as the IRS is supposed to begin enforcing the law as written in 2016.

At the state level there were bills in the Oregon Legislature focusing on the ACA.  One bill, HB 4072, would give a $500 tax credit per employee for businesses that spend at least that amount per employee on wellness programs. Another bill, SB 1543, proposed to fine large employers that avoid the employer mandate by exploiting a loophole in the definition of a full time employee.  If an employee works less than 32 hours per week then they do not qualify as a full time employee under the ACA and thus are not subject to the $2000 tax.  If an employer reduces hours to avoid the tax the employer would be guilty of an unlawful employment practice and the bill specifies penalties. Both bills appear to be stuck in committee and the 2014 session ends on March 9^th.

There are several trends worth highlighting.  Two are related to felonies.  One is from the Equal Employment Opportunity Commission (EEOC) which came out with guidelines that employers could not automatically exclude applicants if they had a felony conviction.  The EEOC wants employers to exclude applicants based on relevant felonies.  An example would be barring an applicant convicted of theft from being a bank teller.  The State of Texas objected and took the issue to court as they did not want to open up positions like a corrections officer to felons- essentially allowing former inmates to supervise current inmates. Other states have also objected but the EEOC has fired back with a letter defending its stance.  This is an issue to keep an eye on in the coming year.  The second trend is a push in some states or municipalities to bar employers from asking about criminal convictions up front. This effort is often referred to “Ban the Box” in reference to the yes or no question about past criminal convictions on most applications.

Another trend worth noting is workplace bullying.  This issue has been getting greater recognition and OSHA Enforcement can investigate if physical contact takes place.

A possible new trend is could be an increase in requests for accommodation under the Americans with Disabilities Act (ADA).   The American Psychiatric Association released an updated edition of Diagnostic and Statistical Manual of Mental Disorders.  An increase in the number of disorders could lead to an increase in ADA requests.

Arin J. Carmack

Health Insurance Strategies

**Originally posted on 02/26/2013**

Beginning in 2014 the principal part of the Patient Protection and Affordable Care Act, the health insurance requirement, will go into effect.  On January 1st of next year Americans will be required to obtain health insurance from an employer provided plan, or from an exchange or pay a tax/penalty.  Business owners with more than 50 employees will be faced with a similar question; to either provide health insurance or facing a $2000.00 penalty/tax per employee.  (For help in determining your full time equivalent employees as defined under the Affordable Care Act click here). 

Small Business Tax Credit

When deciding if you should offer health insurance there are a variety of things to consider.  Some companies have decided to get out of the health insurance game altogether.  Beginning 2014 these employers will offer a stipend allowing employees to go out and choose their own level of coverage.   The idea is that employees are better consumers and will choose better individual solutions for themselves while companies can limit their exposure to unpredictable swings in health insurance costs.  Another thing to consider is the recruiting and retention of employees.  In many professions offering health insurance coverage is a given while in others it is almost non-existent.  When formulating a strategy for 2014 keep in mind what your competitors are doing. 

Employers Under 50 Employees:

If you have determined that you will be under 50 employees and therefore not subject to the tax/penalty there are still a few things to consider.  Take a look at your employee count.  If you have fewer than 25 employees you may qualify for a tax credit.  Estimate the costs of providing health insurance, any tax credits and other factors to estimate your costs with each scenario.  Keep in mind your personal cost of non- compliance under the individual mandate. 

Employers close to 50 Employees:

For those just under 50 employees there will be the temptation to remain below that number. Remember that just because you are subject to the overall tax the first 30 employees still remain tax exempt.  The marginal cost of the 51^st employee is $42,000 not $102,000.

Over 50 Employees:

For employers that do not offer health insurance with a significant number of employees over 50 the coming year is causing increasing trepidation.  Many business owners are looking to see if their competitors will be passing on costs to consumers or trying one of the many strategies to lowers their costs under the Affordable Care Act.  Temporary employees are being considered more frequently as the temporary employees are counted under the temporary employer’s number of employees for the tax/penalty.  Another strategy has been to increase the number of employees and cut hours per employee.  For example a large restaurant chain signaled that they were planning on making as many of their part time employees truly part time as defined by the ACA.  Reclassifying employees as part time was accomplished by restricting the number of hours a part time employee can work to fewer than 30 hours per week.  Another time honored route to avoid payroll taxes, workers’ compensation and the like is to try and turn employees into independent contractors.  The Affordable Care Act is another reason some businesses will be looking at classifying people as 1099 independent contractors.   Enclosed is a link to the State of Oregon’s rules on independent contractors. http://www.oregon.gov/IC/pages/05-qanda02.aspx  If you go this route review your plan with someone like a CPA or attorney as there are a variety of pitfalls.  For example, the Internal Revenue Service, Oregon Employment Department and the Oregon Department of Revenue do not completely agree on the definition of an independent contractor. Other businesses are looking at breaking up their entities into groups smaller than 50 employees.   The Affordable Care Act has provisions to treat multiple businesses as one entity.  Structuring your businesses in such a manner that will not be considered as combinable is something you should review with an expert in this arena.  If you are considering this option here are links to the IRS website on controlled groups for you and your attorney and/or CPA to review.

Applicability to the PPACA - http://www.irs.gov/pub/irs-drop/n-11-36.pdf

Guidance on controlled groups-  http://www.irs.gov/pub/irs-tege/epchd704.pdf 

 A twist on independent contractors and non-combinable entities is outsourcing employees to another organization to keep your number of core employees closer to 50. Outsourcing non-core functions – from HR to accounting to shipping is easier than ever.

The Affordable Care Act is a complicated piece of legislation.  Review your options.  Put estimated price tags on each option. Evaluate what other are doing or ask your trade association. Doing so now will help avoid a scramble in the final quarter of 2013.

Arin J. Carmack

VP of Risk Management

Will the Affordable Care Act raise or lower workers’ compensation rates?

While doing research for the Affordable Care Act (ACA) I stumbled upon an article about workers’ compensation.  As a Risk Manager my first love is naturally workers’ compensation so I eagerly dived into the Rand Corporation’s study entitled, The Impact of Health Care Reform on Workers’ Compensation Medical Care.  In my experience, conventional wisdom among my peers in Risk Management is that employees with health insurance have lower workers’ compensation claim losses.  I share this preconception which is often reinforced when I see employees that do not have health insurance file workers’ compensation claims that probably did not happen on the job.  One of the many examples that come to mind is a hernia with a highly suspect set of facts.  The worker with the hernia also had a wife and newborn but did not yet have health insurance.  It was certainly within the realm of possibilities that a workers’ compensation claim was a way this employee could get treatment and keep his new job.

Delay in the Employer Mandate

Once again there is a change in one of the key provisions of the Affordable Care Act (ACA). The employer mandate requires all large employers to either provide health insurance to their employees or pay a penalty/tax of $2000 per employee per year (the first 30 are tax exempt).  A large employer is defined as having 50 or more employees (IRS link to determine a full time employee).  Originally the employer mandate was to take place in 2014 but was delayed until January 1^st, 2015.  The employer mandate is still scheduled to take place in 2015 but for penalty/ tax purposes the definition of a large employer will temporarily be changed to 100 or more employees until 2016.  Stay tuned as there have been several changes as we move closer into full implementation of the ACA.