The beginning of January 2015 marked the start to the employer mandate enforced under the Affordable Care Act, and although the employee penalty initiated under this act is meant to lower the cost of staffing, a majority of both midsize and large employers still do not feel fully prepared to comply with the mandate’s requirements, according to a recent ADP study.
The three main areas of uncertainty for most employers include: The SHOP exchange process, annual healthcare reporting to the government, and Penalty management.
According to a recent Modern Healthcare article, employers expressed the most concern among these areas in tracking hours to gauge whether an employee is entitled to coverage and how to handle compliance reporting to the federal government. 60% of large companies with at least 1,000 employees indicated that they are not prepared for “penalty management” under the ACA.
Penalty terms require that an employee who works an average of 30 hours a week must be offered coverage or the employer faces a fine. This applies to companies with at least 100 workers starting this year, to extend to companies with 50 or more workers next year. Roughly a quarter of mid-sized employers (50-999) workers indicated that they have already reduced worker hours to avoid the coverage mandate altogether.
Economic theory suggests that the penalty should be passed through lower wages, limiting the burden on small and mid-sized business owners; however, if firms cannot pass on the cost in lower wages, the high cost of workers may lead firms to reduce output and staff size.
The ADP study found that employer planning includes shifting rising costs onto employees. More than half of mid-sized companies surveyed indicated that they already have or are planning to change, employer contributions. Roughly 44% said they plan to decrease company-paid contributions by increasing the share of costs they charge employees in the form of deductibles and co-pays.
Others are avoiding penalties by firing employees, replacing full-timers with part-timers, or by outsourcing. On the healthcare side, more than 700 hospitals will see their total Medicare payments docked by 1% in 2015 under the Hospital-Acquired Condition Reduction Program (HAC), according to another Modern Healthcare article. Experts predict a $330 million drop in overall payments dues to the program.
The outsourcing of business processes is one of the most effective ways organizations can mitigate the risks posed by the ACA. The DDC Group offers a variety of customizable solutions to help companies streamline the added administrative burden triggered by these challenges and minimize their impact.
To learn more about how you can lighten the burden of ACA employer mandates for your company, please contact John Eisele—DDC’s resident healthcare expert who was recently featured as a guest speaker for the BritishAmerican Business forum on the impact of healthcare reform on small and medium enterprises—via telephone at (770) 653-5052 or email at JEisele@datacapture.com.