Under the Affordable Care Act, an applicable large employer must offer its full-time employees affordable minimum essential health coverage or pay a penalty. A full-time employee is someone who works an average of 30 hours a week (130 hours a month).
There are two methods for determining full-time status: The monthly measurement method and the look-back measurement method. With either method of calculating full-time status, employers must take health coverage into account when furloughing employees or reducing hours.
Monthly Measurement Method
An employer who uses the monthly measurement method for determining full-time status looks at hours worked in the month to determine if an employee is full-time or not. If an employee falls below 130 hours for a month, the individual is not considered full-time and does not have to be offered health coverage. If an employee works 130 or more hours per month, the individual is considered full-time and the employer has 3 months to offer the individual health coverage before running afoul of ACA rules.
If an employee is full-time and the employee’s hours are reduced to below 30 per week (130 per month), health coverage is no longer required to be offered. The employer can terminate health coverage but in most cases a COBRA qualifying event occurs entitling the employee to elect to continue coverage under COBRA.
Look-back Measurement Method
Under the look-back measurement method, an employer counts hours for an employee during a certain period (the measurement period) and applies the result of full-time or not-full-time to a corresponding period (the stability period). If an employee is calculated to be full-time for the stability period because the employee averages 130 hours or more per month during the stability period, that employee must be offered health coverage for the entire stability period.
If an employee is full-time based on look-back results and the employee’s hours are reduced to below 30 per week (130 per month) due to a furlough or other reason, health coverage must be maintained. If the employer terminates health coverage the employer will be subject to penalties under the Affordable Care Act.
If the employee is terminated (not furloughed), coverage could cease but a COBRA election would have to be offered. If the employee is re-hired within a 13 week period, then coverage would have to be reinstated upon rehire.
Employers considering furloughs or other reductions in hours should consider ACA full-time status before changing health benefits.
