Employers Experiencing Lull Before ACA Storm

The Patient Protection and Affordable Care Act (ACA) remained the regulatory issue that respondents to Littler Mendelson’s Third Annual Executive Employer Survey expect to have the most impact on their workplace during the next 12 months; however, those that felt it would have a significant impact dropped 16 percentage points from 57% in the 2013 survey to 41% in 2014.

“It’s not to say that employers are no longer concerned about the ACA—they are, and health care reform continues to be one of the most pressing issues on the minds of all employers,” says Steven Friedman, co-chair of Littler’s Employee Benefits Practice. “However, uncertainty surrounding the ACA, as well as delays in its implementation, has created confusion among employers. In response, 58% said they have engaged employee benefits attorneys or consultants to help track changing deadlines and upcoming compliance obligations.”

“Employers are understanding that the ACA is here to stay,” Friedman tells PLANSPONSOR.

The reported decline in concern about the ACA’s impact could be a result of other distractions. Employers appear to be shifting some of their concerns to the uncertainty that stems from a divided government. Respondents identified rulemaking and enhanced enforcement from federal agencies as the most troubling outcome of a divided government, with 56% indicating concern in regard to the impact on workplace policy.

“With Congress deadlocked and the ongoing divisions in government, employers are feeling the impact of President Obama’s focus on the federal agencies to bring about changes to workplace policy,” says Michael Lotito, co-chair of Littler’s Workplace Policy Institute. “The Department of Labor’s pursuit of President Obama’s ‘income inequality’ agenda was a particular area of concern for employers: 29% indicated concern with measures to raise the minimum wage and expand overtime pay, both of which will have a significant impact on employers’ bottom-line.”

The number of employers surveyed that believe health care reform will have no impact on their workplace went from 6% in 2013 to 12%, while those anticipating moderate impact went from 37% to 47%. When asked why this is so, Friedman says, “Initially, there was a concern that the ACA would upset the applecart of employer-provided health care benefits. While the exchanges did go up in 2014, we won’t really know until 2015 and beyond about how ACA provisions like the employer mandate will affect things.”

He warns that employers will have a lot of ACA-related issues to deal with in the near future. “Right now, there is a lull or calm before the storm. [But], employers are still concerned with regulations and cost issues relating to health care. The fear factor, so to speak, is still there.”

Similar to the 2013 survey, respondents identified a range of actions that they have taken or anticipate taking in response to the ACA’s implementation, albeit to a slightly lesser degree. The implementation of employee wellness programs remained the top action taken by roughly half of employers (52%). About one-quarter of respondents said they would consider offering employees health care benefits through private health insurance exchanges (26%) or limit more employees to 30 hours per week (25%). According to Friedman, others said they would hire more temporary or contract workers, cease offering health care benefits to full-time employees in favor of paying the excise tax, and consider offering employees health care benefits through private health insurance exchanges.

“When you look at steps that companies are taking, such as reducing hiring and limiting work hours, it’s chilling because these kinds of things can affect the growth of an organization,” Friedman says. “Businesses are slowing themselves down to limit their health care expenses.”

Based on the survey results, he believes a lot of small businesses in particular are going to be growing more slowly and looking to hire workers that are part-time and who will work fewer hours. “It could definitely affect workers, businesses and the economy in a negative way,” he says.

As to whether he foresees a change in the way things are going, “It wouldn’t surprise me if pressure were brought to bear on Congress by businesses, especially small businesses, in response to provisions of the ACA are creating hardships,” Friedman states. He says things will probably stay as they are for the moment, but once the employer mandate becomes an issue during the 2015 to 2016 time frame, “we’ll start to see if the impact of this mandate is great, nothing at all, or somewhere in the middle.”

If enough noise is made by negatively impacted business, says Friedman, “We could see a bipartisan push for changes to the ACA.”

The survey was conducted in April and May among more than 500 respondents, which included in-house counsel, human resources and C-suite executives. A copy of the survey results can be found here.