Most Companies Feel Prepared, Although Uncertainty Persists
PwC's Private Company Trendsetter Barometer tracks the business issues and best practices of privately held US growth businesses. This quarter's report incorporates the views of 210 C-suite officers (CEOs/CFOs): 118 from companies in the product sector and 92 in the service sector, averaging $289 million in enterprise revenue/sales, and including large, $500M-plus private companies. Nearly all private companies surveyed this quarter (98 percent) currently offer health insurance to their employees and most (70 percent) report that their current healthcare insurance policy covers more than 75 percent of their full-time employees.
New York, July 11, 2013 —Although the Treasury Department recently announced that it would delay the next wave of requirements for businesses under the Affordable Care Act (ACA) until 2015, the majority of private companies (56 percent) say they're already in compliance with the upcoming provisions, according to PwC US's latest Trendsetter Barometer survey (the survey was conducted earlier this year, before the Treasury’s announcement). Consequently, these companies don’t plan to change their healthcare coverage or contribution levels in anticipation of the ACA requirements that will take effect in January 2015.
Overall, most private companies (72 percent) consider themselves prepared for the ACA's next wave of requirements. Work remains to be done, however ― only 35 percent of private companies say they are well prepared. One-in-five (19 percent) of private companies cite specific actions they plan to take to comply with the ACA, but another 21 percent say they are uncertain about which steps they'll take to make themselves compliant.
“Having an additional year before the ACA's mandatory employer reporting requirements start should allay some of our clients' initial concerns about how best to comply with the ACA,” says Ken Esch, a partner with PwC’s Private Company Services practice. “Business owners should look forward to the Treasury Department's upcoming implementation guidance, as well as take advantage of the additional time by treating 2014 as a pilot year during which their companies can fully adapt health coverage and reporting systems. Taking such actions should help ensure a smooth transition in 2015."
Notably, very few private businesses plan to take negative steps in response to the ACA, such as dropping coverage (just 3 percent of companies) and scaling back to fewer than 50 employees to be exempt from the ACA (1 percent).
"We've seen private companies continue to conduct extensive assessments of how best to go about complying with the ACA," says Esch. "On the one hand, they recognize that they'll have to deal with complex implementation requirements in relatively short time, despite the one-year delay. On the other hand, companies are wary of rushing to embrace new healthcare-coverage solutions before they have an adequate sense of the strategic implications for their businesses. It's important to them that their choices be well considered.”
Healthcare Costs Haven't Slowed Profit Growth but Are Still a Top Concern
PwC's Trendsetter survey finds that most private companies (70 percent) don’t believe the ACA’s cost-control provisions will help their businesses keep healthcare costs down over the next few years. But 58 percent also believe that increased healthcare costs haven’t slowed their profit growth over the past year.
Among the 36% of companies that do believe healthcare costs have slowed their profit growth, most (79 percent) said the impact was moderate. Looking ahead, both sets of companies ― those that think higher healthcare costs have slowed their profit growth, and those that don’t ― project similar 12-month revenue growth rates: 6.1 percent and 6.2 percent, respectively.
With low expectations that the ACA will help manage costs, a large majority of private companies (70 percent) say they’re taking their own steps to control healthcare expenses over the next two years. Primarily, they’re requiring employees to pay more ― either more of the policy premium (31 percent of companies) or more at the point of care/service (29 percent of companies) ― and increasing employer investment in wellness programs (40 percent of companies).
“Companies that plan to shift more healthcare costs to employees should be careful to calculate whether such cost-shifting could cause the company to fail the ACA’s affordability test,” cautions Esch. “Companies that offer wellness incentives also should remember to take those incentives into account when calculating the minimum value of their healthcare coverage plans.”
Nearly three-fourths (74 percent) of private companies that have 50 or more employees say their healthcare coverage meets the ACA definition of affordability. In other words, no more than 9.5 percent of an employee’s income goes toward healthcare coverage. Twenty percent of private companies cite an affordability problem ― either their coverage is affordable to most but not all employees (15 percent) or it is not affordable (5 percent).
A noteworthy relationship exists between a company’s affordability problem and the company's acknowledgement that it will need to make changes in its current healthcare policy in order to comply with ACA requirements. Nearly half (48 percent) of private companies with an affordability problem say they plan to adjust their healthcare policies, compared with only 12 percent of companies that do not have an affordability issue.
Challenging as the ACA may be for these companies, there are benefits, too, for businesses willing to take the initiative. One benefit is the opportunity to help employees be more engaged in their healthcare planning by educating them about their coverage options prior to open enrollment in the state healthcare insurance exchanges this fall.
“We encourage private companies not only to take a proactive approach in assessing which healthcare strategies will best support their overall business goals," says Esch, "but to also take advantage of the opportunity to communicate to employees the value of employer-provided coverage ― particularly as healthcare benefits remain an important tool for attracting and retaining top talent."
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