Local Laws on Health Coverage Could Become a Nightmare

When San Francisco’s landmark health care initiative went into effect in January, requiring employer-paid coverage for workers in the city, Doug Slack wondered how his staffing company division could afford it.

The law, which is being closely watched around the nation, requires companies with 20 or more employees to provide health coverage at set rates for qualified workers or pay into a city health fund. For the temporary staffing industry, whose workers typically don’t enjoy company-paid health benefits, the law posed significant challenges. Slack, senior vice president of the northwest U.S. division of Adecco International, worried that the law would send his San Francisco operation into the red.

Under the new law, the global, Swiss-based staffing corporation would be required to contribute $1.76 per hour toward health coverage for its temporary workers in San Francisco who met certain requirements. The law is aimed mostly at lower-paid workers, which, in Adecco’s case, means mostly clerical and office temps. Those positions have much lower margins than professional contract workers. “At $1.76 per hour, it would have taken all of our profits away,” Slack says.

So Adecco did what staffing firms, restaurants and many other San Francisco businesses affected by the new law have done: It passed the buck. Adecco added an extra cost onto client bills to cover the new law, then nervously awaited the reaction.

“It has been a bit of an effort,” Slack says. “But with only a couple of exceptions, we have been able to have our clients view it as a cost of doing business in San Francisco.”

Adecco also managed to find an insurance company willing to provide a health plan for its temp workers who qualify for coverage under the city law.

So far, so good. But staffing firms now are waiting to see if locally mandated health coverage that includes temporary workers will get traction elsewhere. What worries companies like Adecco is the idea of other cities adopting their own laws, creating a patchwork health coverage system that might vary dramatically from place to place.

“The nightmare for the staffing industry is that we do this with different plans and different states and different cities,” Slack says. “Then it becomes an administrative nightmare.”

Such a system would affect not just staffing firms but also client companies that make use of contingent labor in different locations across the country.

The San Francisco experience has focused additional attention on the role the nation’s contingent and temporary workforce plays in the issue of health coverage. While the industry as a whole tends to oppose mandated coverage for its workers, there is also growing support for some form of affordable health coverage that temp workers could carry from job to job and city to city. An affordable national plan or health coverage system might benefit not only temp workers but also staffing firms in their quest for qualified contingent workers.

“Some industry leaders believe that finding ways to extend affordable and portable health insurance coverage to temporary and contract workers would encourage more people to consider employment with a staffing firm and consider staying with a staffing firm for longer periods of time,” says Richard Wahlquist, president and CEO of the American Staffing Association.

In the meantime, staffing companies have gotten some relief from the San Francisco law. Under revised rules, temps must have worked 90 days to qualify for coverage under the law, and they must work an average minimum of 10 hours per week over a three-month period. That has reduced the number of temp workers who qualify for coverage in San Francisco.

The American Staffing Association is urging other cities and states considering San Francisco-like laws to include similar eligibility requirements.

Workforce Management, October 6, 2008, p. 36 — Subscribe Now!