SITKA, Alaska — Hames Corp. here, which operates six retail stores, is preparing for the final rollout of the Affordable Care Act (ACA) next year by leveraging budgeting and forecasting software that closely manages personnel costs for his 150 employees, between 55% and 60% of them full-time.
Designed for small- and medium-sized businesses, the system — Budget Maestro, from Centage Corp., Natick, Mass. — tracks and analyzes all salary-related expenses. “The ability to analyze and budget labor and related benefit costs has been invaluable, particularly in light of the unknowns and challenges related to the Affordable Care Act,” said Maxwell Rule, chief financial officer for Hames. “We can now accurately budget and monitor our health care costs, even down to the specifics of an individual employee’s health plan options.
“This tool is the best I’ve found so far in getting a handle on what the financial impact of the ACA is going to be.”
A family-owned business that runs one supermarket (Sea Mart Quality Foods), one small grocery store (Market Center), two convenience stores and two liquor stores began using Budget Maestro in late 2011. Previously relying on Excel spreadsheets to handle budget forecasts, the retailer decided to adopt Centage’s system to better manage its expanding business, including the two convenience stores acquired in 2004.
Hames currently offers health insurance to full-time employees at all of his stores — with a 90-day waiting period — except for the two convenience stores. Under the ACA, businesses with 50 or more employees who don’t offer coverage to all full-time employees (defined as those working 30 or more hours per week) are required to pay a penalty if at least one employee receives subsidies in the government-run insurance exchanges. The annual penalty is equal to $2,000 multiplied by the number of full-time employees minus 30 employees. Employers who offer coverage that is not affordable to all employees pay a penalty equal to $3,000 multiplied by the number of employees who are enrolled in subsidized coverage in the exchanges.
The $2,000 penalty is far less than what Hames is currently paying for family coverage for employees, said Rule. “We have a good benefits package for the size employer we are.”
Looking ahead to next year, Rule said, “It’s going to be a business decision whether or not to pay the penalty or provide group health insurance.” Employees without group insurance would be able to purchase individual insurance from the exchanges.
The budgeting software will provide “a good handle on what our benefit costs will be when we start looking at options down the road,” said Rule. “It boils down to whether the company can afford to offer the health insurance benefit.” At this point he plans to continue offering the insurance benefit, “though there are a lot of unknowns as far as what costs will be.”
Unions will be assessing the tradeoff between getting employers to pay for coverage or using the exchanges. “If a large number of union members are eligible for subsidized coverage in the exchange, those workers may be better off receiving that amount the employer would have contributed to their health benefits in the form of higher wages and purchasing subsidized coverage in the exchange,” said the UC Berkeley Labor Center in a document on the ACA published last year.
In a survey of employers conducted by Towers Watson/National Business Group on Health, 45% of respondents said they are somewhat to very likely to offer an employer-sponsored health plan to only a portion of their employees and direct ineligible employees to the exchanges.
The Budget Maestro software also helps Hames oversee one of the key elements of the ACA, which is distinguishing part-time from full-time employees. In particular, it handles “look-back periods,” documenting that the number of existing full- and part-time employees over a period not exceeding 12 months corresponds to the number the employer claimed leading into the period. For newly hired employees, under certain circumstances, employers would have six months to determine an employee’s status. “If you’re not within certain parameters, there can be penalties,” said Rule.
Rule uses the software to budget the number of full-time positions in each store department so that managers can hire accordingly. He can also determine the number of hours a person/position has been allocated over the next 12 or 24 months. “Hopefully, this can help us prevent managers from giving part-time employees full-time hours,” he said.
The system also allows Rule to set up individual benefit packages, including family or individual health insurance. “I can drill down and manage labor costs and benefit costs,” he said.
Prior to using the budgeting software, Rule employed manual Excel spreadsheets that became too cumbersome, time-consuming and error-prone, and lacked timeliness, he said. But in seeking a replacement, he found that packages were either not sophisticated enough or were costly enterprise systems.
The Budget Maestro system proved robust once Rule had invested sufficient time setting it up, he said.
Along with managing personnel costs and preparing budgets, the system is able to import sales data from accounting systems (Microsoft GP in Hames’ case) and produce balance sheets, department profitability, and cash flow statements, and execute cash forecasting automatically as the budget changes in real time. It can also consolidate data from multiple stores as we’ll as drill down to individual stores and departments. In addition, the software can generate reports that are “understandable to store and department managers,” he said. These reports replaced traditional management reports and financial statements.
Rule declined to cite the cost of the system, which is installed internally on a workstation. He said the ROI comes in part from its ability to integrate with accounting software and import data, eliminating dual entry.
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