One in Two Large EmployersUnprepared to Fully Complywith the Affordable Care Act

Recently ADP® announced findings fromresearch examining how companies areapproaching Affordable Care Act (ACA)compliance. Based on ADP's new white

paper, Affordable Care Act and EmployerConfidence: Navigating a Complex ComplianceChallenge, more than half of large employers(1,000+ employees) are unprepared to comply withall ACA regulatory requirements.

"As we meet with large employers, it has becomeclear that many don't have the systems orprocesses in place to meet ACA compliancerequirements, highlighting a need for a cohesiveinternal effort and perhaps a third-party partner,"said Vic Saliterman, senior vice president, ADP."With reporting requirements based on 2015 dataand subsequent penalties going into effect in 2016,the decision to go it alone on ACA compliance couldprove risky based on current levels ofpreparedness."

While the majority of large employers (70%) handleACA compliance internally, the study revealed thatthese employers do not feel fully prepared tomanage several critical compliance requirements,including Exchange notices (62%), ACA penalties(60%) and annual health care reporting (IRS Forms1094/1095-C) (49%).

In response to ACA compliance requirements, largeemployers also plan to take a number of strategicworkforce management and cost containmentactions, including:

Change employee benefits plans

As a result of the ACA Excise Tax on high-valuehealth care plans that becomes effective in 2018,employers are continuing to employ benefitsstrategies that shift more costs to employees. Nearlytwo-thirds of large employers (63%) plan to increaseemployees' share of costs through changes toemployee deductibles, employee co-pays oremployer contributions.

In addition, many employers are trying to reducecosts by emphasizing consumerism through plandesign. More than one-third of large employers haveintroduced a low actuarial value plan. Of theseemployers, more than half (57%) have decided tooffer a Consumer Driven Health Plan (CDHP). Thiskind of plan design is generally the most effectiveway to actively engage employees and theirdependents in making smart health care decisions,which can ultimately help to reduce costs.

Expand benefits coverage beyond full-timemandate

A majority of large organizations have or plan to

MARCH 2015: One in Two Large Employers Unprepared to

Fully Comply with the Affordable Care Act

Most Workers Like Current Mix of Wages andHealth Benefits, But Discontent Growing

Costs and Employee Productivity Top Priorities forBenefits Programs

Nontraditional Wellness Initiatives EmergingAmong Workplaces

This newsletter is for informational purposes only and should not be considered as legal advice.

Executive Perspectives

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extend benefits coverage beyond the mandatedACA full-time employee population (30+ hours ofservice per week). More specifically, 61% havealready extended such coverage or plan to do so. Ofthose who have already or plan to extend benefitscoverage, the top reasons include: talentacquisition, talent retention and avoiding penalties.

Modify employee hours

The study found that the majority of employers arenot planning to change employee hours in responseto ACA requirements. Most employers in the studyoffer coverage to all employees averaging at least30 hours of service per week during the employer-defined measurement period. Only about two out offive large employers have limited or are planning tolimit hours for some employees.

"The ACA has impacted many elements ofworkforce management, including HR, benefits,time, leaves of absence, and payroll," said DavidMarini, division vice president and managingdirector, strategic advisory services at ADP. "Asemployers continue to work toward ACAcompliance, they should consider forming cross-functional teams equipped with the right tools andexpertise to monitor and record employee hours, theaffordability of coverage and rising health carecosts."________________________________________

Most Workers Like CurrentMix of Wages and HealthBenefits, But DiscontentGrowing

Most workers are satisfied with the healthbenefits they have now, but nearlyone-third express interest in changingthe current mix of benefits and wages

offered by their employers, according to the latestfindings from the non-profit Employee BenefitResearch Institute (EBRI).

In 2014, nearly 70 percent of American workers saidthey were satisfied with the mix of wages and healthbenefits they currently receive. Slightly moreworkers said they would give up health benefits toget high wages (19 percent) than those who would

trade wages for health benefits (12 percent), EBRIfound. However, those who would give up benefitsfor cash has nearly doubled, from 10 percent in2012 to 19 percent in 2014.

“This growing interest in trading benefits for wagesmay reflect an intensifying desire for real wagegrowth in the age of the Great Recession,” said PaulFronstin, director of EBRI’s Health Research andEducation Program. “Choice of health plans isimportant to workers, and they would like morechoices. But most workers express confidence thattheir employers or unions have selected the bestavailable health plan – and they are not as confidentin their ability to choose the best available plan iftheir employers or unions did, in fact, stop offeringcoverage.”

EBRI also found that if current tax preferences foremployment-based health benefits were to change,and the benefits were to become taxable, nearly half(47 percent) of individuals say they would continuewith their current level of coverage. This is up from40 percent in 2012.

Among the remaining respondents in 2014, 26percent say they would want to switch to a lesscostly plan provided by their employer, 20 percentsay they would want to shop for coverage directlyfrom insurers, and 7 percent say they would want todrop coverage altogether.The analysis examines public opinion surroundingemployment-based health coverage using data fromthe 2013 and 2014 Health and Voluntary WorkplaceBenefits Survey (WBS) conducted by EBRI, as wellas historical data from EBRI’s Health ConfidenceSurvey (HCS).

Among other WBS findings:

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The importance of benefits as criteria inchoosing a job remains high among Americanworkers, and health insurance in particularcontinues to be, by far, the most importantemployee benefit to workers. This finding hasremained constant even following enactment ofthe Patient Protection and Affordable Care Actof 2010 (PPACA), which has raised questionsabout whether employers will continue to offerhealth coverage to their workers in the future.

Choice of health plans is important to workers,and they would like more choices, but mostworkers express confidence that their employersor unions have selected the best availablehealth plan. Moreover, they are not as confidentin their ability to choose the best available plan iftheir employers or unions did, in fact, stopoffering coverage.

Individuals are not highly comfortable that theycould use an objective rating system to choosehealth insurance nor are they extremelyconfident that a rating system could help themchoose the best health insurance.

________________________________________

Costs and EmployeeProductivity Top Priorities forBenefits Programs

As companies focus largely on maintainingemployee productivity and controlling costswhen designing its benefit programs,according to the Employee Benefits Trends

Survey released last month by Wells FargoInsurance, benefit plans can also greatly improveemployee loyalty. According to the survey, C-suiteexecutives and benefit managers cite managingcosts and maintaining employee productivity as themost important goals in both the short (12-18months) and long term (five years). Additionally, C-suite executives (88 percent) and benefit managers(85 percent) agree that benefit programs have themost impact on improving employee loyalty as wellas increasing employee engagement and loweringcompany medical costs.

Wells Fargo Insurance designed the EmployeeBenefits Trends Survey to better understand howcompanies are responding to healthcare reformrequirements while also providing their employees

with competitive benefits programs. Surveying C-suite executives and benefit managers fromcompanies across the U.S. with more than 50employees, the survey generated 950 responsesand covered topics including cost containmentstrategies, employee attraction and retention,outlook on healthcare reform, and financial impact ofemployee health.

“As the benefits landscape continues to evolve,employers face challenges and opportunities asthey adapt to new requirements,” said Dan Gowen,national practice leader with Wells FargoInsurance’s Employee Benefits National Practice.“It’s a balancing act for many companies as theylook to maximize employee productivity, retentionand morale while also controlling cost - a factor weexpect to become even more important ascompanies prepare for the Affordable Care Act(ACA) excise tax in 2018.”

With 2015 underway, most companies have madekey changes to their benefits plans. According to thesurvey, seven in 10 companies have made or are inthe process of implementing changes for coveringspouses as well as to increase the percentage thatemployees must contribute to premiums. Six in 10have also changed or are in the process of changingoptions for the type of plan offered. While mostemployers have not yet made changes such asmoving from fully-insured to self-funded or usingprivate exchanges, the survey found that thosedecisions and offering a high deductible plan, arethe top initiatives now under consideration.

As companies look ahead, they remain focused onmanaging costs, wellness offerings and familycoverage. With wellness leading the list, C-suiteexecutives and benefit managers will focus oncoverage of family members, employee attractionand retention during the next five years.

“We keep our employees well-informed in all

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“...C-suite executives and benefitmanagers agree that benefit programs

have the most impact on improvingemployee loyalty as well as increasingemployee engagement and lowering

company medical costs.”

aspects of where we are headed as a company, andoffer incentives for them to continue to be part of ourcompany. Benefits are the number one issue whenit comes to employment with our company,” noted asurvey respondent.

The focus on wellness is very strong with 93 percentof C-suite executives surveyed anticipating anincrease or improvement in the importance ofwellness offerings. Half of the companies that haveconsidered or are considering a change in wellnessofferings said they are doing so as a result of theACA. Finally, 55 percent of employers will haveimplemented incentives and/or penalties in 2015 forwellness compliance.

“Employers who take a more coordinated approachto integrating wellness programs with their existingemployee benefits and productivity solutions will bewell-positioned to achieve growth and cost savings,”added Gowen.________________________________________

Nontraditional WellnessInitiatives Emerging AmongWorkplaces

Celebrating a birthday, rolling up thesleeves for a community volunteer projectand taking that extra day of vacation areprobably not the first activities that come

to mind concerning workplace wellness. However,less traditional benefits are quickly taking the stageas top wellness initiatives, according to theInternational Foundation of Employee BenefitsPlans' recent survey Workplace Wellness Trends.

More traditional wellness initiatives like health riskassessments and flu shots remain popular amongworkplaces, but the International Foundation noticeda growing emphasis on more non-traditionalinitiatives like mental health coverage, vacation timeand tuition reimbursement.

According to the survey, top non-traditional wellnessinitiatives include:

Vacation time/time off use is encouraged (66percent)

Mental health coverage (63 percent)

Tuition reimbursement (63 percent) Community charity drives (57 percent) On-site events/celebrations (50 percent).

Some of the more unusual offerings emerging arediscounted or free wearable tracking devices,themed dress-up days, game leagues, financialeducation and workplace design changes likecollaborative work spaces, standing/treadmill desksand walking loops.

Top traditional wellness initiatives include:

Flu shot program (71 percent) Smoking-cessation program (54 percent) Health risk assessments (51 percent) Health screenings (50 percent) Wellness competitions/fitness challenges (42

percent).

Organizations are offering wellness initiatives fordifferent reasons—59 percent offer wellnessprimarily to invest in/increase worker health andengagement, while 41 percent primarily aim tocontrol/reduce health-related costs.

"Employers are taking a greater interest in the socialand mental well-being of their employees," saidJulie Stich, CEBS, Director of Research. "Bothtraditional and nontraditional wellness benefits arecreating the return on investment employers arelooking for in their workplace wellness programs."

Among organizations analyzing and aware of theirwellness ROI, 93 percent are achieving positive ROI–the average ROI per $1 spent is $3. Amongorganizations tracking more specific wellnessefforts, 54% said wellness efforts have improvedengagement, 45% said wellness efforts reducedabsenteeism, and 38% said wellness efforts havepositively affected their organization's overall bottomline.

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