Now that Jan. 1 has come and gone, the employer mandate portion of the Affordable Care Act is in partial effect. Along with its anticipated cost increases, it’s safe to say 40% to 50% of the time we spend talking with buyers of staffing services is dedicated to addressing ACA concerns. As many who follow the law may remember, the ACA implementation was forecast to be a disaster of almost biblical proportions for the industry. The cost increases and legislative burden would crush the industry and drive companies to reduce drastically the way they use contingent labor.
So far, this is not been the case. At least in the near term, the news is good on the cost front. With some exceptions, the level of cost increases that have been proposed by providers to buyers have been much lower than anticipated, with some clients having no increase at all and others seeing costs rise by less than 1%. Usually, and not surprisingly, we are seeing the most significant increases in the lower-skilled roles. This stands to reason, because contingents in higher skilled roles were often offered healthcare as a matter of course, while the lower skilled roles were almost universally not being provided compliant levels of coverage.
This anecdotal evidence matches data from our 2014 buyers survey. Here are the findings related to the ACA’s costs:
- Expectations regarding bill rate increases due to the ACA among buyers and suppliers of temporary labor seem to be converging. The percentage of buyers who report they expect to pay no share of ACA costs — 36% in 2014 — has fallen by nearly half since 2012, when it was 62%.
- Buyers of professional staffing are more likely than buyers of commercial staffing to expect no increase in bill rates due to the ACA. The sample size among commercial buyers was not large, but the difference between these two groups was nonetheless statistically significant.
- The median expected bill rate increase among buyers was $1.00 per hour. If buyers who expect to pay no additional cost are excluded from the calculation, this figure increases to $2.00 per hour. These figures are comparable to the median expected bill rate increase among suppliers of temporary labor ($1.50 per hour).
So what do you do when you are confronted by suppliers with a rate increase? This is a business decision and will vary depending on your situation and contracts. Some, in the spirit of partnership, will accept increases at face value to make sure their supply chain remains whole, others will deny increases and test the market, and still others will work with suppliers to exhaustively audit and verify the validity of such increases before agreeing on a mutually acceptable number.
Regardless of company culture and timeline, I believe effective program management requires the contingent workforce manager to aggressively audit and validate any proposed cost increase regardless of its source. Only in doing so and working collectively with your providers can mutually identify areas of cost containment and opportunity. In the end, a healthy supply chain is the best way to ensure the program stands the test of time.