By MATEUSZ PERKOWSKI
Farmers who aren't directly subject to national health care reforms for employees may still end up with higher labor costs from the overhaul, experts say.
"This is going to be a huge challenge for a lot of farms," said Leon Sequeira, an attorney with the Seyfarth Shaw law firm who is studying the effects of the Patient Protection and Affordable Care Act, commonly known as Obamacare.
Starting in 2014, many employers will be required to provide affordable health insurance for their workers or face penalties from the federal government, he said.
The mandate applies to companies with 50 or more full-time equivalent workers who are employed for 120 or more days in a year, which will exclude many farmers.
However, much is still unknown about how the law will actually be enforced -- for example, how government agencies will determine whether small employers qualify for exemptions from the law, Sequeira said during a recent Oregon Farm Bureau meeting.
Growers who believe they don't fall under the law's provisions should nonetheless document how many people they employ each year in case they're audited by federal inspectors, he said.
They should speak to a tax advisor and attorney to determine how best to configure their workforce to limit financial impacts from the law, Sequeira said.
Farms that consists of multiple limited liability companies will generally not be able to use such corporate vehicles to avoid compliance -- the mandate will still apply if the controlling entity has 50 or more full-time employees, he said.
At this point, the official policy of the Internal Revenue Service is that farmers don't have health care obligations to workers leased from labor contractors, he said.
That view doesn't seem to square with the U.S. Labor Department's policy that farmers are "joint employers" with labor contractors who share many responsibilities, Sequeira said.
"It remains to be seen whether the IRS is going to change its view on this," he said.
It's possible the Labor Department could eventually require farmers to cover health insurance for workers if the labor contractor does not, Sequeira said. "We don't know yet."
Since many labor contractors will qualify as large employers who must provide affordable health insurance, they can expected substantial new costs next year, said Frank Gasperini, executive vice president of the National Council of Agricultural Employers.
"It's going to have to impact their rates," he said. "The only way for them to survive is to pass that cost on to growers."
Affected labor contractors will need to provide them with affordable health care, which means the cost to the workers can't exceed 9.5 percent of their household income, Gasperini said.
That's still a hefty cost for many farm workers, who may then turn down the contractor's insurance plan, he said.
If they do so, though, they won't qualify for subsidized coverage from state exchanges and will be subject to fines if they remain uninsured, Gasperini said.
Implementation of the overhaul will probably be "chaotic" during the first couple years, so hopefully federal agencies will be broadminded in helping farmers comply with the law -- rather than trying to bust them for errors, he said.
"With any massive change, there's a lot of opportunities to make mistakes," Gasperini said.