Obamacare Mandates Mean Cuts or Higher Costs for Minnesota Schools

Published November 8, 2013

Thirty is the magic number in the Affordable Care Act for hard-pressed Minnesota school districts scrambling to avoid hundreds of thousands of dollars in penalties and new health coverage costs.

That’s the cutoff that triggers the ACA requirement for schools to provide health coverage to paraprofessionals, cooks, bus drivers, and other nonteaching employees working 30 or more hours a week. It’s also the magic number that triggers the so-called “pay or play” $2,000-per-worker Internal Revenue Service penalty for employers with more than 50 employees who do not provide coverage.

A Watchdog Minnesota analysis of Minnesota Department of Education data found 22,800 non-licensed school employees work between 30 and 39 hours per week, making them eligible for required health benefits under ACA, yet vulnerable to reduced hours to get under the magic number of 30.

“It affects a lot of people, and some of those people are by choice part-time under 30 hours a week. Some of them are over 30 hours, and some of them already have benefits depending on the school district, full health benefits, and some have nothing,” said Gary Lee, associate director of management services at the Minnesota School Boards Association.

Thousands Affected
Minnesota school districts employ 63,000 non-licensed personnel. While teachers receive health benefits under collective bargaining, the state doesn’t track coverage for non-licensed employees, though it’s generally not considered a standard benefit.

About 22,000 non-licensed school employees (35 percent of the total) work less than 30 hours per week and thus don’t qualify for medical coverage under the ACA. Approximately 18,000 (29 percent) of the state’s non-licensed school employees work 40 or more hours per week, another pool of workers that must be covered if they aren’t already.

More than half of the employees working 30-39 hours per week are special-education paraprofessionals (12,500), followed by general instructional aides (2,600), food service workers (1,350), health service employees (1,075), and clerical and secretarial staff (1,025).

“The impact on paraprofessionals, they’re the ones as a group that I think would be most concerned because they’re right around that 30-hour mark,” said John Nelson, a tax manager with the accounting firm Eide Bailly, who helps school districts determine their liability. “So a lot of schools are looking at that group in particular as an area that is going to cause some issues for them.”

Penalties Apply
The so-called “pay or play” penalty also applies to districts that currently provide partial medical benefits for those who work more than 30 hours. With more than 200 employees in that category, the Eastern Carver County School District calculated a potential IRS penalty for not extending qualified coverage at about $600,000.

“Currently the [school] administration is looking at how they want to proceed with either doing the increase with what we are contributing to their health benefits or if the district is willing to take the penalties, risking if someone were to go to the exchange, then we would pay the penalty. They’re kind of weighing all of those options,” said Laurie Zebell, benefits specialist at Eastern Carver County Schools.

One District’s Dilemma
In the Hayfield school district in southern Minnesota, there were no good options for addressing the quandary faced by 20 paraprofessionals and two secretaries working more than the magic number of 30 hours per week.

It came down to  spending $157,000 more to provide them with medical insurance, paying $132,000 in IRS penalties for not extending coverage, or reducing weekly work schedules to 29 hours to avoid the ACA requirement to provide medical benefits.

The school board voted in June to cut back the 22 employees’ workweek to 29 hours with a $1 an hour pay increase to help make up for their lost time and compensation.

“Unfortunately, we can’t raise our rates for education to help offset the cost of providing them with insurance,” Ron Evjen, superintendent of Hayfield Community Schools, told local media. “We don’t have the money in the budget to pay the fine or for the added health care cost.”

‘No Free Option’
In July, when the Obama administration announced a year delay in the employer mandate until 2015, Hayfield schools rescinded the shortened workweek. Yet the same dilemma faced by the Haywood school district confronts educators across the state and country.

“There is no free option in this whole gamut of choices that we have to pick from,” said Lee. “We’re trying to do first of all what’s best for our students, which are our customers, and from there make some wise decisions on how we can provide a good education without going bankrupt.”

A search of the Minnesota DOE website found no information or direction for school districts on health care coverage for non-licensed employees. No one there responded to a Watchdog Minnesota inquiry.

The Minnesota School Boards Association has begun holding seminars for districts to begin assessing their liability under the ACA. Although the employer mandate will not take effect until January 2015, identification of employees who qualify for medical benefits will take place in 2014.

In some districts, the issue will be part of contract talks with unions that represent some non-licensed school employees, including the Minnesota School Employees Association, Service Employees International Union Local 284, and Education Minnesota.

Tom Steward ([email protected]) is a reporter for Watchdog.org. Earl Glynn at WatchdogLabs.org contributed to this report. Reprinted with permission from Watchdog.org. Image by Christina Care.