The Obama Administration’s February 10 announcement of another delay in the employer mandate under the Affordable Care Act did little to assuage the ACA-related cost concerns of the movie and television production industry.
Companies with between 50 and 99 full-time-equivalent employees (FTEs) are now exempt until 2016 from offering ACA-compliant health insurance to employees. However, a majority of movie and TV-show productions employ well more than 100 FTEs.
About 60 percent to 65 percent of production workers are unionized and already get health insurance under collective bargaining agreements. It’s the other 35-40 percent that the industry is mostly worried about, says Mark Goldstein, CEO of Entertainment Partners (EP), a firm that provides payroll and other people-related services to the industry.
One kind of production company reviews scripts and green-lights productions. Once a project is approved, that company sets up a separate legal entity to handle the product’s actual production and commences hiring the workers it will need. “There’s no ongoing infrastructure like in corporate America,” says Goldstein. After the production is completed, that entity is disbanded.
The complicating element, therefore, is that production workers are itinerant. The non-unionized ones in particular may work on several projects in a year. The ACA’s employer mandate provides an exclusion for people employed for less than 90 days, notes Joe Scudiero, EP’s chief labor counsel, but all longer-lasting gigs are subject to the mandate.
Not only that, under the ACA employers must combine different periods of employment except where a break in employment is at least 13 weeks.
“Someone might work on a Disney feature film for a few weeks and later hook on with a Disney basic-cable product,” says Scudiero. “Those are entirely different, separately managed divisions. In the past there was no need for those divisions to talk to each other or to aggregate hours because the two employments would have been considered unrelated.” But under the ACA, all entities within a “production family” are considered to be the same employer.
All of these issues will make it tricky to keep track of which non-union workers are entitled to benefits and for which time periods, and to coordinate the provision of benefits for those who works for several different production companies in a year, the EP executives say.
Companies like EP are considered co-employers of production workers. They specialize in ensuring that the workers get paid appropriately under collective bargaining agreements and to make sure all benefits are paid to the guilds or unions they’re associated with. In a given year EP, a 750-employee company, performs that work for about 2,000 productions that employ more than 300,000 workers.
Now the bar is set higher for EP and the production companies it serves. “We’ve never had to deal with the prospect of providing any type of insurance to non-union workers, let alone insurance that would be compliant for ACA purposes,” says Scudiero. “It’s into the tens of thousands of such workers who would qualify as full time under the ACA and qualify to get insurance for the first time.”
Practically speaking, Goldstein points out, production companies won’t have the option to simply not provide health insurance for non-union workers and instead pay the ACA’s $2,000-per-employee annual penalty (which in almost all cases is less than the cost of health insurance). That’s because, under the law, a company that opts to pay the penalty must pay it for the entire work force, union and non-union alike. But because of collective bargaining agreements, production companies would still have to provide health benefits for the unionized workers.
Goldstein also notes that over the past decade foreign countries have ramped up efforts to lure U.S. productions overseas with tax incentives and grants. The ACA-related complications “are potentially another consideration for pushing production outside the United States,” he says. “Obviously that [would have] an impact on jobs here.”
The whole matter puts the entertainment business in an unusual position. “Our industry has always been supportive of President Obama’s actions, but the complexities around the ACA are unique for our industry,” Goldstein says.
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