The Affordable Care Act: Strategic Decision- Compliant or Pay to Play

462919173Thanks to Uncle Sam for delaying the Affordable Care Act penalty phase for employers with over 50 employees till 2015, staffing companies have another year to better understand how the law will affect them and whether to be compliant with the law or Pay to Play. It will also give our industrytime to educate our customers before passing through the cost of the insurance if we decide to be compliant.

The staffing industry is the single most affected industry by healthcare reform. The most compelling decision to be made by staffing companies is whether to comply with the law and offer insurance to temporary employees eligible for insurance or should pay the penalty. For many larger staffing companies, they may find that being compliant with the law not only costs less, but may also give them a marketing edge over their competition. The marketing plan and message will require a well thought out plan and investing time to educate the sales team and internal service staff on what the message is. For staffing companies considering paying the penalty of $2,000 per employee, make sure you are aware that the true cost of paying the penalty is closer to $3,000, considering the tax implications.

Now that 2014 is here, it would appear that there is plenty of time till 2015 when the penalty would be incurred. Getting your ducks in order early will be important. Understanding the monetary implication is the foremost concern for a staffing company. Determining how many employees are eligible is the first step. Then determining what your worst case scenario would be if all employees accepted your insurance.

PREMIUM CONTENT: Affordable Care Act: Options for Outsourcing Compliance

If you plan to be compliant, this may bring outstanding marketing opportunities. You now will have many decisions to make including the pass-through cost to your customers. We have determined that the cost we will need to pass through to clients in 2015 range from a low of 15 cents per hour to about 36 cents per hour.

I chair a national staffing organization of non-competing companies known as Affiliated Staffing Group (ASGroup). Our mission and goal is to “share best practices” and resources. At ASGroup we have had the advice of the top insurance organizations that understand our staffing industry the best. Through one of our board members we found an insurance organization, specializing in self-insurance. Our largest staffing companies met with the top executives and their underwriter. At the outset of our meetings, the insurance organization was a little skeptical in underwriting a self-insurance captive model to the staffing industry. Our owners were also skeptical of the risk of self-insurance since the only experience they had was with workers’ compensation captives and were concerned that the risk was similar. In the end, after a thorough understanding of staffing and insurance, both parties saw a business relationship to be a win-win. An exclusive insurance program was developed for ASGroup members to participate in.

Now with another year allotted by the government to plan for the implementation of healthcare reform, and our “ducks in order” for insurance, we have time to plan strategically for the roll-out to our temporary employees and clients. Our strategy will need to thoroughly plan for educating our sales and service team, as well as our customers. Salespeople are rarely comfortable talking about price increases. They will have to be well-educated on how to promote the health insurance cost pass-through to their clients. Your company should begin to engage in developing a consistent message and presentation that will be communicated to customers. It is essential to have good marketing materials and regular printed materials to be distributed to customers.

ASGroup meets three times per year and our mission of sharing best practices will enable us to share a good staffing industry message and share any printed materials we jointly develop. Our key managers attend meetings and in a “roundtable” format of information, receive a lot of take home value.

Many of our larger members are industrial staffing companies employing 5,000 to 15,000 temporary employees annually. Our ASGroup member owners and key managers can now can work together to share ideas at our upcoming meetings for the delivery of education and a message to our clients. Start planning now … there is much to do to assure compliance with the Affordable Care Act and a smooth transition with clients and temporary employees to health care reform.

MORE: The ACA 2014 and beyond 

Roy Fazio
Roy Fazio is co-founder of Protocall Group and chairman of Affiliated Staffing Group.

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