Corporations unprepared for compliance

December 1, 2010

Only about one in five respondents said their company has a program in place to analyze the impact of the Patient Protection and Affordable Care Act on their health benefits

WHEN IT COMES to healthcare reform, forget black and white. Think in shades of gray.

"Managing the tension between the complexity of the law, the items that are not fully known and those items that are known is what employers need to be thinking about right now," says Cathy Creech, a member of Ernst & Young's Performance & Reward group.

In many cases, however, that's not happening, according to an Ernst & Young survey of more than 300 large employers. Only about one in five respondents said their company has a program in place to analyze the impact of the Patient Protection and Affordable Care Act (PPACA) on their health benefits. Even fewer (17%) said they anticipate developing such an analysis in the next 12 to 24 months.

"Companies feel that they are going one way directionally, but they haven't done the detail work to see how the legislation affects their particular organization," Creech says. "One sees a lot of speculation and rules of thumb about how much healthcare reform will cost. But the specifics will really depend on a company's employee demographics and the designs of the plans they offer."

That lack of detailed understanding translates to ambivalence on the part of corporate leaders as to whether or not their organizations are actually prepared to comply with PPACA rules. At the outset of the survey, most respondents (65%) were confident or very confident of their organization's ability to address changes required. After answering a number of questions regarding specific aspects of the legislation, however, 27% expressed confidence about their organization's readiness to handle the changes and risks associated with the legislation.

The problem, Creech says, can be traced to the complexity of PPACA, the speed with which it is being implemented, and the evolutionary nature of the federal guidance. Collectively, these factors make it difficult for companies to take definitive steps.

They need to understand the current state of their reporting systems and determine whether they'll need to make additional investments in technology, for example. Finally, they need to have a mechanism for communicating benefit changes.

Plans that lose grandfather status have the longest list of rules to follow, but all plans must comply with certain other rules, such as allowing children under the age of 27 to stay on their parents' benefit plan. Adding those dependents could increase costs, but employers will need assess just how many beneficiaries are likely to enroll and calculate the projected cost per member.

Tax credits for small business could offset some of those costs.

-Shelly Reese

Commentary is independent of source data