TPG’s Healthcare Review: August, 2014
“A Plan of Action from TPG”
Welcome to the eighth edition of TPG’s Healthcare Review, a forum to keep our current clients, prospective clients, and candidates apprised of the ever-changing landscape of healthcare in a post-reform world. Tracking the iterations, implementations, extensions and exemptions of the Patient Protection and Affordable Care Act of 2010 (PPACA) can be a full time job. Each new day seems to bring a wave of information which needs to be fully digested before the next news cycle starts. Again, it is our intent to update this newsletter monthly through the end of 2014 to keep you well-informed of the latest developments and their implications. We thank you in advance for your interest, and welcome your comments and questions throughout the year.
Since PPACA was signed into law over four years ago, there has been great concern as to its impact on business and industry. Within the temporary staffing business there were dire predictions of the end of our industry or a drastic switch to assignments which only included part-time hours (less than 30 hours per week as defined by PPACA). The primary focus of debate was on the so-called “Employer Mandate,” its requirements, who qualifies, and the penalties for non-compliance. There was the Supreme Court battle and the ultimate decision that most of the law was constitutional (striking down the punishments for not enacting Medicaid expansion). This decision ushered in the political morass known as the election of 2012. Following that we faced two postponements of the Employer Mandate which led to the current situation we find ourselves in with a January 1, 2015 partial implementation date. It has been quite a journey which we have chronicled over the past year through this newsletter.
As a premier provider of temporary staffing services throughout central and eastern Pennsylvania, we face the same challenges as many of you in determining the best approach to dealing with the increased costs associated with the Employer Mandate. Some companies and entire industries have sought to avoid PPACA’s Employer Mandate by reducing the number of hours an employee may work per week to below 30 so as to avoid the “full-time” designation outlined in the law. This approach would not be consistent with TPG’s history of providing additional benefits to our temporary employees in order to attract a higher quality labor pool for our clients. Our management and board of directors believe that this “loophole” approach will only provide short-term relief on costs due to the inevitable closing of the loophole as well as a noticeable increase in turnover (due to employees moving to jobs with benefits). This approach would also reduce the number of qualified candidates willing to work only part-time hours without benefits.
Having made the decision to provide healthcare coverage which would meet PPACA’s definition of “Minimum, Essential Coverage,” we began an analysis of our current employees to determine how many “Benefit Eligible” employees would fall under the Mandate. As many of our employees work on longer term assignments, our number of Benefit Eligible employees per PPACA increased tenfold. This type of increase in our operating expenses would be a devastating blow to our cost structure. Many in our industry had already decided to increase mark-ups on pay rates to cover these added costs. Our market research discovered that increases of 3% to 7% were being discussed with clients as a surcharge to cover PPACA expenses for the employer mandate. That was when the team at The Performance Group decided to take a different approach.
PPACA has become a “cost of doing business” and rather than looking at it as a potential profit center, our approach was to make the adjustment to the post-reform world as painless as possible to our clients. Most would agree that Benefit Eligible employees tend to be more stable in their work habits and represent the employees who are further along in their training than those who are not yet eligible. Providing healthcare benefits to qualified employees may attract a higher quality employee which may provide improvements in productivity for our clients.
Of course not every employee will qualify for benefits, and many may decide not to seek coverage as they may have coverage elsewhere (spousal/family policy) or due to the cost to the employee. In order to qualify as “Affordable” under PPACA, the employee’s portion of premium costs cannot exceed 9.5% of their “household income” which equates to the employee’s gross pay due to the unavailability of household income information. This limit may actually be exceeded in the case of additional premium costs related to tobacco use. Although offered at an “Affordable” rate, many employees may choose to pay the penalty from the “Individual Mandate” rather than pay the cost of the insurance.
With the potential for a significant reduction in the participation rates in healthcare programs sponsored by staffing firms, an across the board increase in mark-ups may not reflect the reality of the changes in cost structures. The Performance Group’s approach is to isolate the actual insurance costs for Benefit Eligible employees so that they may be analyzed and tied to specific assignments. The insurance costs can be paid through a separate billing based on actual cost plus a nominal administrative fee. TPG will provide reports for the client’s use in their PPACA compliance tracking. Also, the client will be able to utilize the information to determine the value of the added cost per employee in their operations.
This approach to the costs associated with the implementation of the Employer Mandate on January 1, 2015 has been reviewed with many of our largest clients and has been accepted as a “common sense” approach to staffing under PPACA. Our team of professionals would be happy to discuss details of how this program may work for you next year . . . unless there is yet another postponement of the Employer Mandate. We will be ready either way. Please don’t hesitate to contact us if you have questions or would like to discuss any of the details of our program.
How TPG Can Help Your Business
At The Performance Group, we will do our best to keep you informed of any changes in PPACA which could impact your business/employment. Next month we will dig into the little talked about topic of PPACA Compliance (reports, tracking, etc.) Thank you for your continued interest in the TPG Healthcare Review.
Thomas E. Readdy
President
The Performance Group
Contact A Performance Consultant