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Tuesday, July 2, 2013

William Diedrich is a partner at Atkinson, Andelson, Loya, Ruud & Romo PLC. He can be reached at wdiedrich@aalrr.com.

Under the ACA, large employers - those with 50 or more full-time employees - are required to offer full-time employees affordable health care that provides minimum essential coverage and minimum value. The vast majority of the nearly 1,000 school districts in California have at least 50 full-time employees. Coverage offered by employers is considered "affordable" if the cost for individual coverage does not exceed 9.5 percent of an employee's household income. These requirements go into effect on Jan. 1, 2014. A full-time employee under the ACA is an employee who works an average of 30 hours per week during a relevant measurement period. Employers have the option of using a period of between three and 12 months to measure the hours of each employee to determine full-time status. If an employee is or becomes full-time, the employer must offer benefits to that employee for a time following the measurement period. The first major impact for school districts arises from this measurement of full-time status. School districts use substitute employees to replace teachers or support staff who are temporarily absent from duty. Substitutes are typically paid at a lower rate and are not provided health and welfare benefits. As a general rule, substitute employees serve on a day-to-day basis and are not guaranteed an assignment from one day to the next. School districts have historically used high-performing substitutes to fill in for teachers on long-term leaves of absence. It is not unusual for these so-called long-term substitutes to work most, if not all, of a school year in one classroom. This practice helps provide for continuity in the educational program of the students whose regular teacher is absent from duty. Upon the return of the regular teacher, the long-term substitute returns to serving as a substitute for any absent teacher on a day-to-day basis.

Todd M. Robbins is an associate at Atkinson, Andelson, Loya, Ruud & Romo PLC. He can be reached at trobbins@aalrr.com.

As the Jan. 1, 2014, deadline approaches for full implementation of many of the reforms included in the Patient Protection and Affordable Care Act (ACA), there has been much discussion about the impact ACA has on individuals and on small business employers. The potential crippling financial effects of ACA on public sector employers, specifically school districts, seem to have gone unnoticed.

As a result of the ACA, school districts may be forced to limit substitute opportunities and forgo a major operational benefit to schools.

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School district noncertificated staff - called "classified employees" - also provide valuable services as substitutes when other classified employees are absent from duty. For example, a child nutrition worker who is employed three hours per day during student lunch preparation and service, may serve as a substitute for an absent clerk or custodian. This valuable service provided by the classified employee not only benefits the employee who is able to supplement his or her income, but also benefits a school because it is able to use a proven and reliable employee to fill in for employees who are absent from duty. As a result of the ACA, school districts may be forced to limit substitute opportunities and forgo a major operational benefit to schools. Employees who have traditionally served as substitutes may work enough hours to be full-time employee for purposes of the ACA. Consequently, a school district may find itself obligated to offer health insurance coverage to a large class of employees who previously were not entitled to such benefits. The unexpected increase in benefit costs could result in larger class sizes because money once allocated to hire teachers must be diverted to pay employee benefits, or in staff reductions to bridge gaps in already distressed budgets. Neither alternative is acceptable. The "Employer Shared Responsibility" penalties included in the ACA complicate matters. Under one set of penalties, an employer, including a school district, could be subject to a penalty of up to $2,000 per year per full-time employee if it fails to offer minimum essential coverage to at least 95 percent of its full-time employees in 2014. As an example, Los Angeles Unified School District, which employed 59,811 people during the 2012-2013 school year, could face tens of millions of dollars in penalties if it failed to offer minimum essential coverage to all of its full-time employees. Under a second set of penalties, a school district employer could face a penalty of up to $3,000 per full-time employee who is not offered affordable coverage and who receives a tax subsidy to purchase health insurance in Covered California, the California health insurance marketplace. Tax subsidies are available to individuals with household incomes of up to 400 percent of the Federal poverty level. A school district employee earning $43,000 per year may be eligible for a tax subsidy to purchase health insurance in the marketplace. School district employees often earn lower salaries than their private sector peers but frequently receive more generous and more expensive benefit packages. Because the cost of "affordable coverage" cannot exceed 9.5 percent of an employee's household income, a school district may have difficulty providing affordable coverage if the employer does not pay most or all of the employee's share of the premium. If the coverage is not affordable for a group of employees, a school district would have to pay a penalty of $3,000 per employee who receives a tax subsidy to purchase health insurance. Educational employers are unique in their missions and in their "customers." The ACA's definition of "full-time" employee should be modified to account for the many variables encountered by school districts each day. School districts should be able to freely employ substitutes in the classroom and to support school operations without having to be concerned about potential financial liability if substitutes achieve full-time status. They should be able to optimally staff classrooms and classified positions to best meet the needs of students without incurring significant financial penalties. Our leaders must reevaluate their priorities and make allowances that provide school districts the operational flexibility they need. Unfortunately, the noble goal of ensuring all Americans have access to health insurance may result in money being siphoned away from classrooms. This unintended consequence of health care reform could make it more difficult for our students to compete with their global peers.

William Diedrich is a partner at Atkinson, Andelson, Loya, Ruud & Romo PLC. He can be reached at wdiedrich@aalrr.com.

Todd M. Robbins is an associate at Atkinson, Andelson, Loya, Ruud & Romo PLC. He can be reached at trobbins@aalrr.com.

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