Published by John Dalmata on January 21, 2016

How Payroll Companies Built Their Solution

Most Applicable Large Employers (ALEs) are aware of the robust and varying data requirements that go into determining ACA compliance—employee hours being one of the most important. Rather than building a software from scratch, many of the payroll vendors leveraged their established hours-tracking software and built their ACA solutions on top of their current system. By leveraging the same back-end databases utilized by their payroll and time and labor systems, they were able to build an additional ACA offshoot program for tracking measurement periods and changes in an employer’s full-time population.

Reduced development specifications means lower development costs, more competitive pricing, and getting the product to market faster.

The result: An ACA reporting tool that acts as more of a widget within the current system, rather than a new stand-alone software product. For payroll companies, selling such Obamacare solutions as “stand-alone” products, this would entail turning on a system (and many of the associated costs) and only using, call it 10% of the functionality. Tough to have competitive pricing or high retention when you’re selling a product that has 90% wasted or redundant cost and functionality in the eyes of a client.

So, rather than pitch a client a product with 90% bad value, knowing that everyone needs payroll, they pitch a solution that provides the highest potential value, optimized automation, and the lowest amount of redundant processes.

I get it, this is not how we’ve grown accustomed to buying things. We prefer buying niche products that have the exact functionality that we are looking for at bottom pricing with minimal disruption to current business processes. Not to mention, switching payroll vendors can be demanding. But let’s look at the alternative.

What About the Stand-Alone Obamacare Solution?

There are indeed stand-alone ACA products that have come to market in 2015. Backed by VC funding, these developers have created affordable systems that can receive an upload file with all necessary data elements, track your full-time population, and generate and electronically file annual 1094-C and 1095-C forms. For many employers, these pure stand-alone systems have been timely solutions in 2015.

That being said, you’d better like working in Excel.

While payroll vendors may tick you off by pitching payroll with their ACA solution, stand-alone Obamacare solutions come with an added bullet to your job description: ACA data manager. In some cases for companies with particularly large populations, high turnover, and complex benefit packages an ACA data manager could warrant a part-time or full-time position.

Where Does it Leave you?

One size does not fit all when it comes to Obamacare software solutions. Whether you have a pure stand-alone or a fully automated process, the value will be found in risk reduction, time savings, and labor cost optimization. These savings are directly proportional to how dynamic an employer’s data may be:

High turnover means tracking multiple individual measurement periods
Large part-time populations with long hours increase the chance of an employee transition from part-time to full-time
Collective bargaining agreements often mean multiple benefit units and varying employee contributions
Large employee populations will then magnify the scale of manual intervention required to keep data current and accurate

Bottom line: Before following old patterns of buying minimal stand-alone solutions when it comes to Obamacare administration, evaluate whether or not the accompanied labor costs and compliance risks for manual data management make a stand-alone solution cost prohibitive in the long run. That being said, when they are a good fight, the can be great solutions to an employer’s Obamacare compliance needs.