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Affordable Care Act


Published on | Learn how companies are coping with the new requirements under the Affordable Care Act. This new white paper will help you prepare for the changes coming into 2014.

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Affordable Care Act

  1. 1. The Affordable Care Act:Using HR Technology to Ensure ComplianceSpring 2013 • Lockton CompaniesL O C K T O N C O M P A N I E SMATTHEW KAISER, SPHR, CEBSVice PresidentDirector of Technology Solutions(816) 960-9418mkaiser@lockton.comPreparing for ChangeWith 2014 on the horizon, employers are wrestling with decisions abouthow they can best prepare for compliance with the Patient Protectionand Affordable Care Act (PPACA). Employers should ask themselves thefollowing questions:™™ Is my current human resources (HR) technology sufficient tosupport our increased administration needs?™™ Would it make sense to outsource certain elements of ourcompliance activities?™™ What new systems have been released that might help us moreeffectively manage our responsibilities and our workforce?When I first entered the workforce as a part-time retail employeewhile in high school, I quickly learned a new set of rules. First,my friends could not stop by to see me at work (which they didanyway). Second, I had to wear a shirt and tie (I had two androtated them daily). And finally, under no circumstances wasI allowed to work any overtime. This final rule from the storemanager was the most frustrating to me. I needed as muchmoney as possible to repair my old Pontiac. But, as the weekendapproached, I’d often find the very dapper Rick (my manager)with his crisp shirt sleeves rolled up, bent over his paper reports,determining who still had hours they could work over the weekendand who needed to be taken off the schedule.
  2. 2. 2If Rick was around today, he quite possibly would have a new 30-hour threshold he would be managing to due tohealth reform. The PPACA is affecting employers as new regulations are released and implementation deadlines arelooming. With the Act’s requirement that, beginning in January 2014, all large employers must offer their full-timeemployees health insurance (or pay a penalty), employers have begun to look at how they can manage their workforcesto both comply with the law and to minimize any increased costs. In addition, employers want to know how their HRtechnologies will help them in this workforce management. Will special software be required or will their existing timeand attendance or benefits administration solutions handle this responsibility?Health Reform’s Impact on Workforce ManagementAs of January 2014, large employers must offer coverage to their “full-time employees” or risk penalties (we refer tothis as the “play or pay” obligation).™™ Generally speaking, large employers are those who employed in their controlled group an average of at least50 full-time equivalent employees during the preceding calendar year. The 50-employee threshold is reached bycombining:hh Number of full-time employees. The health reform law defines a full-time employee for this purpose as onewho averages at least 30 hours per week.hh Number of full-time equivalents (defined as all other employee hours divided by 120). This is to be calculatedeach month, then averaged for the look-back period of the prior calendar year™™ Employers are not required to offer health insurance to employees who average less than 30 hours per week.Some employers, such as those in retail, hospitality and food serviceindustries, have a sizable number of variable-hour employees in theirworkforces. Special rules apply for determining when variable-hour andseasonal employees average 30 hours and need to be offered coverage(see Lockton’s Health Reform Advisory Practice Alert from January 21,2013).While some of these employers will decide to offer all employees full-time health benefits, others may consider managing their workforceunder the 30-hour threshold to minimize the number of employeeseligible for benefits. While, like my old boss, they may have paperschedules to manage, it is far more likely they will turn to their HRtechnology to help them estimate and manage the population of theirworkforce.
  3. 3. Spring 2013 • Lockton Companies3HR Technology Requirements: More Than aTime ClockIn order to define who is a full-time employee andtherefore who is to be offered health insurance, HRsystems must be able to analyze each employee’semployment status, hours worked and time off. Thesystem, ideally, must also decipher the myriad of healthreform rules surrounding the full-time employeecalculations, yet be flexible enough to meet eachemployer’s specific plan design.Any single employer may have multiple HR technologiesfrom multiple vendors in place at any time, includingpayroll, time and attendance (also known as workforcemanagement), benefits administration or even stand-alone calculation engines designed for specific processes.There are three systems most likely to manage thisdetermination and another that will support them.Time and AttendanceThis system houses the transactional details ofemployees’ time on the job. This functionality may behoused within a point-of-sale (POS) system at a retailbusiness. This category of applications is also knownas time and labor management (TLM) or workforcemanagement.Benefits AdministrationThis system looks at incoming data on an employer’scensus to determine who is eligible for various benefits.Of course, once an offer of benefits is triggered,employees will use this system to learn about and enrollin their benefits.Business Intelligence (Workforce Analytics)These reporting engines help segment transactional dataand provide predictive analysis. Analytics functionalityis often outside of HR, falling into the purview of acompany’s information technology staff.PayrollThis core business system plays a supporting role to thethree systems noted above. Because one of the tenets ofhealth reform is that the offer of health insurance mustbe “affordable,” employers will likely use their payrolldata to ensure compliance. A safe harbor could becreated by ensuring that each employee’s cost of healthinsurance is less than 9.5 percent of his or her wages.The system, ideally, must also decipher the myriad of health reform rulessurrounding the full-time employee calculations, yet be flexible enough tomeet each employer’s specific plan design.
  4. 4. 4Surveying Current OptionsLockton’s HR Technology & Outsourcing Practicerecently interviewed multiple payroll, time andattendance, reporting and benefits administrationvendors to find out how they will be supporting healthreform law. We expected to find that the systems closestto the transactional details would be the ones performingthe calculation and then passing an “eligibility flag” tothe benefits systems to trigger an offer of coverage.We were surprised to find that the vast majority ofvendors expect – at least in the short term – thebenefits administration system to be responsible foridentifying full-time employee status and calculatingbenefit eligibility. The anticipated process will requirethat the payroll or time and attendance system producean electronic file containing employees’ reportedhours, which the benefits system will analyze todetermine enrollment eligibility based on workforcerules established by the employer. This dependenceon the benefits administration vendors seems a short-term solution. We expect changes as vendors makeadjustments to their systems based on new regulations.At this point, a few key vendors have functionalityalready deployed that can identify which employeesmeet the full-time employee definition under healthreform. Most other vendors report that a solutionis in “developmental stages.” Typically, the biggestsystems and vendors are the slowest to change, so it isnot surprising that the first vendors to offer supportin the review of historic data to determine full-timeequivalency are the smaller, more nimble vendors. Manyof these are business intelligence vendors (also knownas workforce analytics), such as Equifax, Visier, andInformation Builders. Many of these platforms werepreexisting business intelligence systems that now canbe pointed to labor data to help an employer manage itsexposure.The vast majority of vendors expect the benefitadministration system to be responsible foridentifying full-time employee status.
  5. 5. Spring 2013 • Lockton Companies5Equifax’s eThoria is an example of a businessintelligence engine that can be pointed at financial,organizational or HR data. However, since Equifaxis already providing HR services for employersthrough their compliance, tax and other HRsolutions, this gives them a first-mover advantagearound health reform. With domain expertise, theyhave quickly branded eThoria to help employersmodel possible health insurance strategies.Vendor Work in ProgressEmployers should expect many HR technologyvendors to deploy new functionality or bring newsolutions to market by the third quarter of 2013,as vendors are assembling product developmentteams now. While most solutions available as of thepublication of this paper are one-off reporting toolsconfigured to look at the HR data, soon mainstreamsystems will be updated to provide this functionalityin the core applications employers already use to runtheir businesses.Kronos’ Workforce Central®appears to be the mostdeveloped, which we predicted, given the size oftheir market share in the time and attendance space.The key to their value proposition is their schedulingcapabilities, which will help employers proactivelymanage their workforce under a particular hour thresholdon a go-forward basis. Another similar application withscheduling capability is Ceridian’s Dayforce. They recentlylaunched new HR and payroll modules to accompany theexisting time and attendance functionality.Ultimate Software’s UltiPro®is already delivering someof the best HRIS business intelligence tools withtheir included reporting engine, IBM’s Cognos. If anemployer has access to their time and attendance data andunderstands the complexity of the tool, this engine can beused now to provide workforce analysis. Already in 2013,Ultimate Software has released prebuilt analytics or queriesfor this toolset to simplify implementation by an employer.Employers should devise a technology approachthat is based on the intended strategy for handlingtheir variable-hour population.
  6. 6. 6In the benefits administration space, severalvendors all report work under way to supportthe eligibility determination by their thirdquarter 2013 release. bswift has stated thatthey will release, by August 2013, additionalaccumulators that allow configuration basedon the employer’s rules and various look-backperiods. Other vendors reporting similar plansinclude BusinesSolver, Empyrean and ADP.Developing a Technology ApproachThat Supports Your ComplianceStrategyEmployers should devise a technologyapproach that is based on the intended strategyfor handling their variable-hour population.If employers are planning an “acceptance”approach, where they will provide health insurancechoices to whatever portion of their workforce workedmore than 30 hours on average during the previous year,they can safely wait until fall, when updates are plannedfor their existing benefits administration or time andattendance applications.If instead an employer prefers to take a more“intentional” approach, then a more immediateinvestment in business intelligence may provide thatability right away. With the right tools, employers canmanage their health insurance responsibility by adjustingschedules of existing employees or work groups tomaximize the amount of their controllable labor thatwill come in under the 30-hour-per-week average.Implementing a new technology approach earlier inthe year will be most beneficial, because the more timeover which they have to spread the changes, the lessdisruptive those changes will be.An organization that is fully ready for theimplementation of January 2014’s required offering ofhealth insurance to all full-time employees will have ananswer for the following issues:™™ Transactional Accuracy – Monthly tracking ofhours worked by each employee.™™ Adaptive Scheduling – Modeling tools that layeravailable workforce members over needed openingsat the lowest overall cost to the organization(overtime vs. benefits eligible, etc.).™™ Look Back Calculators – Analytical ability tonewly eligible variable-hour employees, based onvariable lookback and stability periods for servicehours.™™ HRIS Status Monitoring – Provides full awarenessof changes in eligibility, such as part-time to full-time or full-time to part-time movements.
  7. 7. Spring 2013 • Lockton Companies7™™ Eligibility and Enrollment – Once employees trigger eligibility or forrequired enrollments of new full-time employees, benefits administrationtools are necessary to process each enrollment and offer other benefitoptions outside of medical.™™ Employee Communication – Self-service and other tools tocommunicate required notices, such as the existence of public exchanges.™™ Business Intelligence/Reporting – Ability to provide dashboards tomanagement regarding workforce planning, as well as to meet requiredreporting to the government over coverage offered and populationmetrics.Plan Today for January 2014Employers should plan for January 2014 to identify and implement a strategy,as information about the workforce during the 2013 plan year will determinetheir health insurance eligibility beginning January 1, 2014. Some employersmay be able to take proactive steps in 2013 to prevent certain employeegroups from averaging 30 hours a week by reducing their hours later inthe year, if that’s a strategy they choose to implement. This strategy mightrequire the employer to start recruiting additional part-time help to ensure anadequate labor supply is available.Lockton’s HR Technology & Outsourcing Practice will continue to monitordevelopments and publish updates, highlighting the vendors and systemsthat are providing solutions for these health reform-related issues. In themeantime, please contact your Lockton Account Team for immediatesupport.What Lies Ahead?Employers need a solution that cancalculate employee hours occurringduring their defined look-back, initialmeasurement and stability periods. Thesolutions can vary from paper reportsto automated benefit enrollment orscheduling systems.For those that hire mainly full-timeemployees, the various measurementperiods are not as critical. However,employers with a high seasonal andvariable-hour workforce are especially inneed of a trusted, effective solution.A Year to PrepareDefine full-time employees, definesolution needs and evaluate currentsystems.Evaluate existing vendor partnershipsand new-to-market solutions, definelook-back/administrative/stabilityperiods. Begin configuring systems toconform to the policies and proceduresthat will be put in place in 2014.Complete system configurationand implementation. Begin initialmeasurement and begin adjustmentsto scheduling or workforce laborsupply.Finalize any outstanding workforcerules. Be ready for health reform-related changes that take effectJanuary 1, 2014.™™ Maureen Ditto, PHRProject Manager™™ Brad Mandacina,CEBS, QPFCProject Manager™™ Cynthia Olavarria KaufmanSolutions Consultant™™ Pat CuejiloProject Manager™™ Courtney LawrenceProject Coordinator™™ Eric HollenbachProject CoordinatorLockton HR Technology Research Team:Q1Q2Q3Q4
  8. 8. Our MissionTo be the worldwide value and service leader ininsurance brokerage, employee benefits, and risk managementOur GoalTo be the best place to do business and to© 2013 Lockton, Inc. All rights reserved.Images © 2013 Thinkstock. All rights reserved.gwhitepaperkaiser2013kaiser_the affordable care act_spring13.inddblg