Heather Montgomery had the upcoming spring semester at Clemson University all planned out. The college sophomore secured an internship with a Maryland-based print company in March 2012, putting her well on her way to fulfilling a degree requirement mandated by the university’s Graphic Communications program of completing two internships.
The internships could be either paid or unpaid, and interns are required to work full-time — 40 hours each week. The company she planned to work for would pay her $10 an hour and provide her with housing, she told Red Alert Politics.
But the Clemson student received an email in October saying her internship had been cancelled — because of Obamacare.
“I have some bad news,” the email stated. The program’s internship coordinator “brought up some issues to the employers at [Clemson’s job fair] about Obamacare. With the current uneasy state of what is going on with the government and what wasn’t foreseen by [the company], there is a chance that we may have to suspend our internship program temporarily to avoid a $7,000 fee.
“Since there is no clause about internships, we are not sure what to do,” the email continues. “… I will keep you updated when we know what is going on with the ACA. Sorry about this inconvenience, as it was very unexpected.”
It’s an unforeseen consequence of Obamacare’s employer mandate and a subject neither the Internal Revenue Service nor the Department of Health and Human Services has broached, at least not publicly. Many interns work more than 30 hours each week, and if they’re completed during the fall or spring semesters, interns work a minimum of 90 days. Under the employer mandate, they’re considered full-time employees, and companies are therefore required to provide them with health insurance.
According to Sarah Swinehart, communications director for the House Ways and Means Committee, paid interns are considered employees, and companies would therefore have to cover them under the employer mandate.
After the Affordable Care Act was passed by Congress in 2010, the IRS released more than 18 pages of regulations specifically to help employers determine the difference between part-time and full-time employees, and whether or not they would be required to provide workers with health insurance.
According to the document, some employees are exempt from receiving coverage because of a labor statute called the safe harbor exemption. The provision includes seasonal and agricultural workers, and the IRS uses the example of a ski instructor. But interns are neither included nor defined in the exception.
“Seasonal right now, according to the IRS, is agricultural seasonal workers or holiday retail,” Robert Olson, a San Diego-based labor attorney, said.
Olson added he has not seen interns categorized yet, “and the only way interns have been classified is through that Supreme Court opinion and the Department of Labor’s opinion. And if you don’t meet those qualifications, then you’re considered an employee.”
The Department of Labor classification mentioned by Olson is in reference to a six-pronged test to work as an unpaid intern.
To be deemed full-time, the IRS states employees must work more than 30 hours each week for 120 days. Those days, however, do not have to be consecutive but must be within 360 days. And for some interns, including Montgomery, internships last beyond that time frame.
At General Electric, for example, interns work more than 30 hours each week. The program is offered in the fall, spring and summer semesters, and some stay on for consecutive terms — even working as long seven months. The company, a spokeswoman told Red Alert, has not yet broached the topic of healthcare for their interns.
Edmund Haislmaier, a healthcare policy expert at The Heritage Foundation, said interns generally would qualify for the safe harbor exception. But he, too, said the agency has not yet included them.
This uncertainty, Haislmaier said, is one of many surrounding the employer mandate and an aspect of why it was delayed.
“The proposed rule on the employer mandate of Jan. 2, 2013 does not specifically address how paid interns are to be treated for purposes of the employer mandate,” he wrote in an email. “The Administration has not yet issued a final rule that will, presumably, [be] addressing this and other issues relating to the employer mandate.”
Neither the IRS nor HHS returned Red Alert’s request for comment.
Olson, though, said this issue also affects companies that employ less than 50 workers and take on paid interns, too.
“The more unchartered territory is those that are on the cusp, the 50-employee cusp,” he said. “They’re going to be more cautious in creating an internship program.”
If paid interns do, indeed, qualify for coverage under the employer mandate, companies may think twice before taking on a number that would push them over the 50-employee threshold.
The Obama administration has more than a year before the employer mandate takes effect, but Olson noted the issue of providing paid employees health insurance is not one many companies are aware of.
“They haven’t thought of it yet,” he said. “They only know as much as what the media might put out but don’t know how they will be affected. … It’s just a matter of being aware and trying to keep up with what’s coming up from the government.”
Montgomery, in the meantime, said Clemson University is looking into altering its internship requirements in anticipation of the employer mandate’s regulations. The university did not return Red Alert’s request for comment.
But until 2015, all companies can do is wait.