Employer Mandate puts spotlight on hazards of manual benefits administration

Andrew Brickman

The stopwatch is ticking. On January 1, 2015, the Employer Mandate (also known as “Play or Pay”) of the Affordable Care Act (ACA) starts for organizations with more than 100 employees. While the rules governing this law fill enough pages to make War and Peace author Leo Tolstoy raise his eyebrows, the impact on employers with numerous part-timers is no laughing matter. Many employers with significant variable-hour or part-time populations will have to track these workers and determine their benefits eligibility. And once January 1 hits, these businesses will have to provide benefits to those working 30+ hours a week.

In addition to the requirements and the confusion surrounding the definition of a full-time employee, employers are concerned about handling the cost and additional administration requirements to cover these workers. While it might be considered easy to estimate the number of employees who will be eligible for group benefits in 2015, it is very hard to determine the actual number of employees who will end up electing those benefits.

As a result, employers with large variable-hour workforces are considering a combination of benefits administration technology, outsourcing services, and a shift in contribution strategy to mitigate the potential costs and additional burden of managing these employees. A private insurance exchange/marketplace has been the answer for many businesses. In fact, the private exchange benefits delivery model is just a new spin on an old idea.

Take, for example, cafeteria plans, which got their start in 1978 when the IRS added them to the internal revenue code. The idea behind the cafeteria-style concept was that no single benefit or benefit plan design could meet the needs of a diverse workforce. Employers would define their benefit contribution and employees would receive these contributions as “flex” credits. They then would select the benefit options that most suited their needs and circumstances. While great in theory, this idea proved complicated for employers to administer and created confusion among employees at enrollment time.

Fast forward to today. Benefits administration technology and tools have progressed to a point that it’s no longer prohibitive for employers to offer a diverse number of plan options and designs. With technology, it’s easy to streamline enrollments and eligibility and feed this information electronically to carriers and third party vendors. Sophisticated decision-support and engaging employee education tools can help employees better understand their unique situations and guide them to smart benefit decisions.

A private exchange is really nothing more than a virtual storefront or marketplace that employees use to shop for benefits using employer dollars. Its technology enables employees to easily compare benefit options, determine which plans best suit them, and make the appropriate elections. Those elections feed electronically to the administrators for approval and then to each carrier.

This framework is particularly helpful to businesses who are preparing for an influx of newly eligible employees. Employers can cap their cost by defining a contribution that meets the affordability tests of the ACA and offer numerous plan options to meet the needs of a disparate labor force. The benefit requirements of the lower-wage worker seeking single coverage and a highly paid executive with a family of four can be met on the same platform.

To be clear, day-to-day benefits administration doesn’t end once a private insurance exchange is in place; there will still be challenges associated with the additional volume of benefit-eligible employees. HR must pay careful attention to each component of overall administration, and this is especially true once Play or Pay comes into effect. Verifying dependents, ensuring accurate bills and keeping up with an ever-changing regulatory environment will be even more critical to avoid non-compliance that would trigger an audit. As your work volume increases due to the influx of benefits-eligible employees, errors that used to cost a few thousand dollars in inefficiencies can balloon into tens of thousands of dollars in government fines.

For some employers, though, implementing private exchange technology won’t go far enough to mitigate risks and handle the additional work. These organizations will require outsourcing assistance to handle the bulk of tactical benefits administration and ensure regulatory compliance. Human help provided by outsourcing benefits administration essentially become a key part of their back office.

Healthcare reform has definitely changed the way organizations plan and administer benefits. For those employers most heavily impacted by the law, there is no need to fret. A host of alternatives, including private exchanges, defined contributions, and benefits administration outsourcing can help mitigate the risks and expense posed by the ACA. In addition, these tools can deliver unprecedented levels of efficiencies that often times end up paying for themselves.

Meanwhile, time is racing ahead. Are you ready?


©2015 Corporate Synergies Group, LLC. No part of this material may be republished or distributed without prior written consent.