Farming Industry Balks at Obamacare Requirements

Starting this year, employers with 50 or more employees must offer insurance or pay a fine. (Sandy Huffaker/Getty Images)

Obamacare is throwing the agricultural industry into a tailspin. Farm labor contractors who must now offer their workers health insurance are complaining loudly about the cost in their already low-margin business.

Some are also concerned that the forms they must file with the federal government under the Affordable Care Act will bring immigration problems to the fore: about half of the farm labor workforce in the U.S. is undocumented.

“There’s definitely going to be some repercussions to it,” says Jesse Sandoval, a farm labor contractor based in Stockton. “I think there’s going to be some things that cannot be ignored.”

Sandoval came to an educational conference for farm labor contractors — essentially staffing agencies for field workers — held at the San Joaquin County Agricultural Center in Stockton last fall. Men with broad shoulders, wearing denim jackets and cowboy hats, sat in the audience, listening to lectures on a litany of laws and rules regulating their industry, including Obamacare’s employer mandate.

Last year, employers with 100 or more full-time employees had to offer health insurance to their workers or pay a stiff penalty. This year,  employers with 50 to 99 full-time employees must comply.

Sandoval has about 100 workers on his payroll. When farmers need a crew to pick cherries or pumpkins or asparagus, they call him to send the workers. He needs to offer insurance this year, and he’s smarting at the price tag. At $300 a month per employee, he’s looking at a $30,000 monthly bill.

“Yeah, no. No, no, no,” Sandoval says about absorbing that into his budget. “The numbers aren’t there. My margin is 10 percent. And I have to increase expenses 10 percent? Well, that doesn’t work.”

So, like a lot of contractors, he’s passing the bill onto the farmers, who in turn are passing the bill onto the farmworkers. Under the Affordable Care Act, employees can be asked to contribute 9.5 percent of their income toward health premiums.

But for farmworkers who pick oranges or peaches for $10 an hour, that’s still too much.

Agostin Garcia says the two contractors he works for near Fresno offered him insurance directly. But when he saw the price tag, he turned them both down.

“For me, I’m the only one in my house who works. There’s five of us in the family,” he says in Spanish. “It just wouldn’t work. Either I pay for health insurance, or I pay the rent and utilities.”

Garcia says only a fraction of his co-workers have signed up for coverage. He says when farm labor contractors hand out packets explaining the coverage, the page where workers reject it is right on top.

“I think they do it intentionally,” Garcia says. “They comply with the laws, by saying, ‘I offered.’ But they know that nobody’s going to accept it, they know that nobody’s going to pay those amounts.”

The cost isn’t the only thing about Obamacare stressing people out in the ag industry. Some are worried about immigration problems. Employers have to file new health care forms with the IRS for all their workers, whether they accept the insurance or not.

Kaya Bromley, an attorney who advises employers in the farming industry about the Affordable Care Act, says the health law will make it harder for contractors to turn a blind eye when workers give them fraudulent documents.

“Now that there’s more transparency because of all of the reporting, I think we’re going to have a lot more data on how many illegal or undocumented workers we have,” she says.

Among the contractors she consults for, Bromley has seen a range of quasi-legal and even illegal strategies to sidestep the health law.

“I have heard of employees who are choosing to opt out because they want to fly under the radar. I have also heard of employers who are urging the opt-out or at least encouraging it,” she says. “And I warn all of them that they are going to be in big trouble.”

But it’s still early. There’s been no enforcement yet. The feds haven’t made an example of anyone, Bromley says, and so employers are ignoring the fact that they could face penalties that run several thousand dollars per employee.

“It’s huge. And no one’s talking about the enormity of it,” she says. “When it plays out, and the penalties start getting assessed, that’s when people will start having religion about it.”

Farm labor contractors say they’re stuck in a Catch-22. The Affordable Care Act doesn’t cover undocumented immigrants, but contractors will get fined if they don’t offer them coverage. Contractors aren’t supposed to hire undocumented workers, but the president and Congress can’t agree on what to do about the massive number of immigrants living and working here illegally.

How are contractors supposed to comply with the new health care law when the feds are deadlocked over how to update the immigration system?

“Our government, all they do is talk about it. They don’t fix anything, they make everything worse,” says Golinda Vela Chavez, who helps run a labor contracting company in Salinas.

Her company started offering their employees insurance last year, at no cost to the workers, and she says, still, more than half of them turned down the coverage.

This year, the company has to start filing the paperwork with the IRS and she says it’s been a nightmare.

“They don’t try to help you, they want to get you,” she says. “They implement all these things, because they want to get you!”

Ofelia Reyes just wants peace of mind. She’s has been harvesting nectarines and tying grapevines in fields near Fresno for 20 years. She recently had a breast cancer scare. None of the contractors she works for have offered her insurance.

“No, never. No one’s ever offered me anything,” she says in Spanish. “All they say is, ‘Hurry up! Your ladder is waiting for you. Your co-workers are already over there.’ That’s how we live.”

Farming Industry Balks at Obamacare Requirements 27 January,2016April Dembosky

  • megaboz

    There are a few points I can add to this:

    IRS regulations allow employers to place workers that can be categorized as “seasonal” or “variable hour” into a measurement period of up to 12 months before an offer of coverage is required. With the seasonality and turnover in the ag industry, using this approach can limit the number of employees that an employer is required to make an offer of coverage to. By the time the measurement period is up, the majority of employees may no longer be employed, or there may have been a break in service of 13 weeks or more which means that when an employee comes back to work for the same employer, a new 12 month measurement period begins. The employer is left mainly with the burden of complying with the paperwork requirements to make sure offers of coverage are made on time, the paperwork is filed away in case of audits, and the reporting is done at the end of the year to document compliance with the regulations.

    My understanding is that farmworkers who are here legally are often eligible for MediCal, so that is why some have declined to enroll in coverage. Those who make too much to qualify for MediCal might be eligible for subsidies through the exchanges, but if the employers comply with the law and offer coverage to employee, the subsidies are no longer available to the employees. Another Catch 22 built into the law.

    Although if an employer uses the 12 month measurement period outlined above and an employee never becomes eligible for an offer of coverage, the the subsidy option should still be in place and the employer is not on the hook for a penalty. In this way the law and regulations encourage employees to get coverage via the exchange. One pitfall for the employee may be if the employer offers coverage to all employees during an open enrollment period, regardless of status. In that event, eligibility for a subsidy might be eliminated because the employer has offered the employee “affordable” coverage.

    It is true that the ACA defines “affordability” in such a way as to make it unfeasible for farmworkers (or other lower wage employees like fast food workers) to be able to afford coverage at 9.5% of gross wages for self only coverage. That’s basically adding a tax of over 10% on their take home pay. And that is before adding on spouse or dependent coverage, which the law does not require employers to foot the bill for.

    For balance, the author probably should have talked to farm labor contractors and growers that have been able to offer affordable coverage to employees. Some have used self-insured plans to minimize costs, sometimes picking up the entire cost of the plan while others charge the employees a nominal amount (for example, $10/week) for the employee’s share of the premium. Of course this requires customers (growers) who are able and willing to absorb the additional cost (or who have enough pricing power to pass on the costs to their customers).

  • megaboz

    One other thought: I think it is unlikely that the ACA reporting will have little impact on illegal immigration enforcement. Most “undocumented” immigrants are not undocumented at all, but they are presenting documents to employers that are fake/forged/”borrowed”. As long as the proper documentation is presented, the employers have limited ability (and to be honest, when there are labor shortages, probably limited desire) to question their authenticity.

    The wages and S.S. #’s have always been reported to the Social Security Administration on the W-2, but it has limited ability to act on discrepancies. The SSA “knows” that wages (and SS/Medicare taxes) are being reported from multiple employers on the same social security account number. But it has limited ability to act on this information. (A big stink was raised years back when it tried to send out “no match” letters to employers and that plan was quickly halted.) Even though the names and social security numbers will now also be reported to the IRS, it is not clear that the IRS will have more latitude in this area. Unless an information sharing provision was buried in the ACA somewhere, the information may remain compartmentalized at the IRS and not shared with DHS/ICE.

  • jskdn

    There’s no Catch 22. Employers can’t “knowingly” employ illegal immigrants. They simply have to play the document game that all but assures such employment of illegal immigrants. Their requirement to offer coverage is the same as any other employer. http://files.kff.org/attachment/employer-responsibility-under-the-affordable-care-act-2-flowchart Many farmworkers wouldn’t take it so their employers wouldn’t have to pay for coverage for those that do decline. That makes the calculations in this article that use a 100% take up rate ridiculous. Furthermore, an employer could pay the fine ($2,160/12) for less than the figure used in article’s calculations. Illegal immigrant employees can’t get ObamaCare coverage, which is the act that triggers the fines on employers for not offering coverage, so those employees protect the employers that fail to offer coverage according to the law over legal employees that could go to the exchange or Medicaid. It just takes one such employee to trigger the fine though, according to that KFF doc. Their workers would be subject to tax penalties for not being covered if employer did offer qualifying coverage. Their employees are better off if the employer just pays the fine, because the legal workers could likely get better and cheaper coverage through the exchange, especially those with families and none would be subject to tax penalties for not being covered by officially affordable insurance, that’s not, offered their employer.

  • Combat Override

    Wow. Finally an straight story about the failings about the ACA. Thank you KQED.

    I used to get catastrophic health care insurance for dirt cheap. It was awesome insurance. Now I’d have to pay for pregnancy care, viagra, birth control… everything. Stuff I never wanted, needed and didn’t want to pay for. I liked my plan and couldn’t keep it. Now the cost is 2x and the deductible is nearly the same.

Author

April Dembosky

April Dembosky is the health reporter for The California Report and KQED News. She covers health policy and public health, and has reported extensively on the economics of health care, the roll-out of the Affordable Care Act in California, mental health and end-of-life issues.

Her work is regularly rebroadcast on NPR and has been recognized with awards from the Society for Professional Journalists (for sports reporting), and the Association of Health Care Journalists (for a story about pediatric hospice). Her hour-long radio documentary about home funerals won the Best New Artist award from the Third Coast International Audio Festival in 2009.

April occasionally moonlights on the arts beat, covering music and dance. Her story about the first symphony orchestra at Burning Man won the award for Best Use of Sound from the Public Radio News Directors Inc.

Before joining KQED in 2013, April covered technology and Silicon Valley for The Financial Times, and freelanced for Marketplace and The New York Times. She is a graduate of the University of California at Berkeley Graduate School of Journalism and Smith College.

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