CWS 3.0: October 24, 2012

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Healthcare Reform: Expect to Pay

Who will bear the costs of healthcare reform? Both contingent workforce buyers and staffing firms do not agree on who will shoulder the costs, according to research from Staffing Industry Analysts. The majority of buyers said they expect to absorb none of the costs, while 33 percent of suppliers expected to pass on all of the costs to their clients, based on our recent surveys. Digging deeper, the 411 buyers surveyed said they expected to absorb 15 percent of the costs, on average. However, staffing firms surveyed expected to pass on 65 percent of the costs to buyers. Why is there this disconnect?

The Affordable Care Act does not distinguish between temporary employees and regular or “permanent” employees. The Affordable Care Act considers workers who average 30 or more hours per week to be full time for the purposes of employer penalty calculations, hence the dilemma for buyers and staffing firms alike. The act does not build in variable staffing except in the case of seasonal work, which does not apply to contingent workforce usage as a whole. However, the federal government has provided guidance that would allow employers to use a measurement period of up to 12 months to determine if an employee is full time. While the guidance isn’t is just a proposal at this time, the government has indicated staffing firms can count on it through 2014.  Either way, you can expect your VMS tools to be working overtime as the January 2014 deadline approaches. This is one of the ways buyers and staffing firms can project what costs might be coming their way and plan accordingly based on accurate assignment lengths and hours worked.

Buyer beware. Staffing firms’ plans vary by sector served. Staffing firms that do business with the government, manufacturing, the energy/chemical industries, as well as those providing office/clerical, industrial, engineering/design and healthcare personnel expect to pass on more costs than those servicing tech/telecom, finance/insurance, business services fields and those focused on IT and finance/accounting skills. Perhaps that’s because professional staffing firms are more likely to offer healthcare coverage to their contingents already.

Buyers in agriculture, logistics and manufacturing may expect to absorb more of the costs due to the seasonality of their workforce according to our buyer survey and buyers who hire because a permanent worker is not available expect to absorb less. While some staffing firms will elect to pay the $2,000 annual penalty per full-time employee, remember their employees will still go into the exchanges or be covered on another plan (54 percent of temporaries are insured this way), the cost still remains and this will be passed on to buyers in some form. Lower margin, higher pay rates and higher bill rates are the only places the money will come from and the decision may be for staffing firms to spread the costs across all of their workers depending on the size of their firm.

More people entering into the healthcare system via healthcare reform means more jobs for healthcare providers and their staffing firms and increased pressure on supply. Given the upcoming silver tsunami, the combination of healthcare reform and the aging of the baby boomers will create a huge demand for healthcare professionals for buyers and staffing firms alike. Staffing Industry Analysts predicts a $10 billion revenue forecast for the healthcare staffing segment in 2013, and as former Gov. Howard Dean suggested in his keynote address at SIA’s Healthcare Staffing Summit last week, it is a good time to be in a healthcare profession or in school studying to become a healthcare professional. Dean also believes that there is a possibility more talent may become contingent because they will have access to benefits and that particular barrier to working flexibly  is no longer in place.

Preparation. Your staffing providers will likely be addressing any healthcare reform-related costs as contracts come up for renegotiations, so prepare for those discussions. Then, project what costs might be coming and work to plan accordingly based on accurate historical data surrounding assignment lengths and hours worked using technology.

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