Analyst Perspectives

To comply with the Patient Protection and Affordable Care Act (PPACA or Affordable Care Act), which survived a Supreme Court test and a presidential election, all employers with more than 50 full-time employees must be ready by January 2014 to deal with the lion’s share of the law’s employer mandate requirements. Our recent benchmark research on governance, risk and compliance indicates that many of those employers have significant concerns about compliance issues: 53 percent of participants said they are concerned about them, and 42 percent said they are very concerned. Indeed, the Affordable Care Act is today the most pressing governance and compliance issue for most businesses.

Looking at your organization in terms of its people, processes, information and technology, you can develop a basic framework to assess how well prepared you are to handle its various requirements.

First consider the people aspect: Does your staff have the expertise to understand and track the different parts of the new law? Can you train your staff on what they will need to know about the employer mandate? With only about eight months until the mandate goes into effect, assessing, training and acquiring the talent to execute these functions must be an organizational imperative.

Evaluating the effectiveness of your existing HR and compliance processes is another necessity. Some, potentially including benefits enrollment, onboarding and compensation management, will need to be modified for the new conditions. Re-engineer processes to ensure that you track the right information to both demonstrate compliance with the Affordable Care Act and enable the business to make intelligent, cost-effective decisions in managing its healthcare expenditures.

The Affordable Care Act is based on information. It requires employers to track a number of categories of information, and employers will want to track other kinds also to ensure they are making the right decisions for their businesses. For example, the organization must know how many full-time and part-time employees it has, how many are offered a qualified health plan under the law, and whether that number meets the 95 percent requirement of the law. Tracking this information, as well as the potential costs of healthcare plans for employees and the potential liability for fines if the organization does not sponsor a plan, will require time and likely modification to current HR systems as well.

To pull the information and the processes together, organizations need effective technology. Those that do not have strong systems risk relying on existing systems that will prove inadequate to the task of tracking critical compliance information; spreadsheets will be especially inadequate, we believe. As my colleague Robert Kugel recently wrote, spreadsheets are good tools for personal productivity but not for collaborative enterprise-wide tasks, and modeling and tracking compliance with the Affordable Care Act is definitely that. Our most recent benchmark research on spreadsheets shows that spreadsheet maintenance is a burden that requires even casual users to spend more than one full day per month on it, and power users to spend 18 hours a month on maintenance. Using spreadsheets for complex reporting, modeling or enterprise-wide compliance with the Affordable Care Act will be a bad choice. Organizations also should evaluate core HR management and benefits systems to ensure that they have the correct fields and business logic built into them, as well as reports to both collect information required to show compliance and to help the business understand the effectiveness of the decisions it makes.

At this point I will make three recommendations. First, after evaluating the business from the people, process, information and technology dimensions and coming up with a list of what you need to do, act on it soon; don’t wait. With the clock ticking, you have little time to gain the expertise required, re-engineer required processes, look at information management and upgrade your technology. Second, do the work to understand and model the costs of the choices you will make under this law. Since employers can choose to play or pay, so to speak, they must understand the complete cost implications of both of these options. Finally, don’t be afraid to look at new software vendors if you find you have functional gaps. Specifically, if you have serious gaps in your ability to gather and track the information required in your HR systems, several vendors have developed products and services to help you address the requirements of this new law. Among them is Equifax Workforce Solutions, which I will be writing about soon; its product is crafted to help businesses model and track all the costs of compliance with the law. Another is Ceridian, whose new HR management and payroll systems are designed to help businesses track all the employee-level data needed to comply with the law. There are other vendors as well; it will be worth your while to investigate the market and determine which may suit your particular needs. And keep in touch with Ventana Research as we continue to track the options for managing the Affordable Care Act and locating technology to make it easier and more certain to be in compliance.

Regards,

Stephan Millard

VP & Research Director