Midsize Business Owners Losing Sleep Over Compliance and Health Care Reform

The number of medium-size companies that face regulatory penalties over compliance issues is up

Stephen Miller, CEBS By Stephen Miller, CEBS June 19, 2017
Midsize Business Owners Losing Sleep Over Compliance and Health Care Reform

Owners of midsize U.S. businesses are increasingly concerned about the volume of government regulations they face and, in particular, staying compliant with the Affordable Care Act (ACA), a new study reveals.

In late 2016, the ADP Research Institute, an affiliate of HR services and payroll firm ADP, surveyed more than 750 owners and executives at midsize companies—those with 50 to 999 employees. The findings, published in a June 2017 report, underscored the need for midsize businesses to remain vigilant in the area of compliance. For instance, the survey showed:

  • An increase in midsize companies experiencing unintended penalties from noncompliance.

  • A decrease in organizations' confidence in their ability to stay compliant.

Of the midsize business owners surveyed, 40 percent indicated they had experienced unintended expenses such as fines, penalties or lawsuits because of noncompliance with government regulations (federal, state or local) in the past 12 months:

  • The number of larger midsize companies that faced noncompliance expenses grew significantly in 2016, up to 51 percent from 40 percent in 2015.

  • The number of smaller midsize businesses that faced noncompliance expenses remained relatively steady at 37 percent in 2016, a slight increase from 35 percent the previous year.

Although respondents cited many types of unexpected fines for noncompliance, "what remains concerning is that again this year, about half of those surveyed said they didn't know how many fines or penalties their organizations experienced or the ultimate cost to their company," said John Ayala, president of major account services at ADP.

ACA Concerns

The Affordable Care Act is still a top concern for midsize business owners, with possible repeal and replacement of the statute adding to their uncertainty. Before the November 2016 election, 70 percent of midsize businesses indicated that they were moving forward to comply with the ACA, while only 5 percent were unsure of what to do.  After the election, attitudes shifted with 57 percent planning to move forward with business as usual, while 18 percent were unsure.

The law was also cited as a source of unexpected expenses by 17 percent of larger midsize companies.

The ACA remains "both a high-cost administrative challenge and a source of uncertainty," Ayala said.

[SHRM members-only HR Q&A: How has the Affordable Care Act affected employers that use part-time employees?]


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