Employers Dedicating More Resources to ACA Compliance

Results from HighRoads’ fifth annual compliance trends survey shows that employers continue to face challenges with the requirements and costs of ACA compliance. While many employers measure the success of their efforts by year-over-year cost reductions, the study indicates that compliance teams appear to be getting larger. In addition, employers are still not clear on the aggregate costs of writing, producing and distributing compliance documents.

The Boston-based HighRoads, a service provider of benefits plan management and health care compliance, surveyed mid-sized and large companies representing 5 million total plan participants about their compliance and governance operations; their approach to producing, updating and distributing summary plan descriptions (SPDs); and the steps they are taking to generate the summary of benefits and coverage (SBC) documents and other notices required by the ACA.

Highlights of Findings

The survey found that:

• Despite the risks associated with noncompliance, only two-thirds of respondents have a formal compliance strategy, with 69% having a dedicated governance and/or compliance team, while 31% did not.
• Fewer employers plan to update their SPDs this year, with just 16% planning a rewrite for readability (down 50%) and 67% planning content updates.
• About one-quarter (26%) of employers update and distribute SPDs to active employees every year, but summaries of material modification (SMMs) or notices in annual enrollment materials, were the preferred methods for alerting participants to new plan changes, at 67% and 46%, respectively. 
• More employers (45%) are using or planning to use social media (e.g., Twitter, Facebook) to communicate with employees and retirees. 
• The biggest challenges employers face in producing SPDs are having sufficient resources and managing the review process. Twice as many respondents as last year indicated writing SPDs was a challenge. 
• More employers are producing ACA-required materials in-house than in previous years. Forty percent of respondents generated SBCs themselves this year (up from just 18% last year), and 68% plan to produce the required notice of coverage options in-house.

“What we are seeing is the continued struggle of employers to comply with ACA requirements, yet wisely manage resources and costs. It is a challenge that will only increase as new regulations under the ACA take effect, current safe harbors and postponed effective dates expire, and enforcement of the regulations begin in earnest,” says Kim Buckey, principal of compliance communication services for HighRoads.

More Documents Means More Resources Needed

Having sufficient resources (38%) and managing the review process (31%) continue to be the biggest challenges cited as employers produce their SPDs, says Buckey. Employers struggle with finding people with both benefits knowledge and writing skills to prepare their documents. In fact, the number of employers citing writing or updating content as a leading concern doubled from last year. Some 63% indicated they planned to streamline the process of updating their SPDs (up from 47%).

Employers surveyed say they produce from fewer than 10 to more than 100 separate SPDs, and consolidation is not taking place except for those with the largest numbers of documents. Not surprisingly, the SPD teams are growing. For the first time, more than a quarter (27%) of respondents reported that their internal SPD team consists of six or more people, while 55% get the job done with two to five team members. However, in 18% of companies, SPDs are handled by one person.

“Employers have struggled for years to find the resources, time and budget to produce accurate, reader-friendly SPDs on a timely basis,” said Buckey. “Add to that the requirement of producing documents such as the SBC and the new Notice of Coverage Options, an increasing government focus on readability, and HR and benefits staffs that are already struggling to do more with less, we see more and more companies seeking new technologies that can support and streamline the development and distribution of compliance materials. Equally important is having people who know benefits, know compliance and know how to accurately and clearly write about both.”

Employers were also experiencing the second year of summaries of benefits and coverage (SBCs) requiring a new template and new required information. Despite the change, twice as many respondents opted to produce SBCs in-house this year (40%, up from 18% last year). Far fewer (36%, down from 53%) planned to have their carriers handle SBC production. The 2013 SBC required employers to validate whether their plan met minimum value standards, and the agencies gave employers multiple options for determining whether they met that requirement. Three quarters (73%) of respondents relied on their actuaries for this determination, 23% used their carrier and only 5% used the calculator provided on the Department of Labor website.

Employers were required for the first time in 2013 to provide a notice of coverage options. Given the relatively simple nature of the form, more than two-thirds of respondents (68%) planned to produce these in-house. Twenty-four percent were reaching out to their consultants and just 12% were using their carriers to generate the notices.

Distribution of compliance documents continues to migrate toward electronic channels, with 33% of respondents reporting they used email to alert participants that SPDs and other materials had been posted online, and 31% posted directly to their web portal. Survey results show that employers seem to be providing broader online access, with 63% saying they allowed access from anywhere (not just from work), although 30% limited access only to active employees.

“The continued challenge of compliance may be a contributing factor to the decision of some employers to move their employees and/or retirees to a private exchange,” notes Buckey. “Almost 88% of our respondents indicated that they have considered moving to an exchange within the next five years. Our research indicates, however, that private exchanges will not eliminate plan sponsor responsibility for compliance.”

Organizations that were surveyed include Catholic Health Initiatives, Bozeman Deaconess Health Services, Chico's FAS, San Antonio Community Hospital, Wells Fargo, CHE Trinity Health, Lancaster General Health, Synopsys, Advanced Micro Devices and Aetna.

More information on the survey results can be found here.