What impact will healthcare reform have on the guarding industry?
WASHINGTON—If the full measures of healthcare reform legislation go into effect as planned in 2014, it could have major impacts on the cost of contract guard services. The passage of the Patient Protection and Affordable Care Act and associated legislation, which was signed into law in March 2010, has caused considerable concern and uncertainty for security guard providers as they struggle to understand the impacts the legislation will have on their bottom lines and the costs they must pass along to their customers.
“This legislation will impact every employer and every employer is going to realize a substantial cost increase,” said David Buckman, executive vice president and general counsel for AlliedBarton, a large contract security provider, employing more than 50,000 uniformed security officers.
But the biggest challenge for the security guard provider industry right now lies in the unknown. Because some elements of the legislation don’t take effect for another year or more, and because new Republican leadership has said it wants to repeal the bill, guard providers are unable to anticipate how much higher those costs might be.
“It’s hard to understand anything now, there’s still so much that’s unknown,” said Dan Hoffman, SVP of human resources and legal for Andrews International, which employs approximately 10,000 uniformed security professionals. “We can’t predict what the cost is going to be,” he said. Hoffman said it’s extremely difficult to present clients with projected costs not knowing what impact the legislation will have on the company’s bottom line.
“As we’re looking for new work, we want to be competitive and the obvious ambiguity of the healthcare bill and its impact are making it hard to project costs,” said John Petruzzi, SVP of operations in the Northeast and Canada for Andrews International. “We’re providing businesses with contracts for one- to five-years out and it’s a very treacherous time because of the instability in healthcare costs driven by this bill,” he said.
The largest impact will be felt by guard companies who currently offer little or no benefits to employees. “In our industry, traditionally companies compete and differentiate themselves on the basis of the benefits they provide,” AlliedBarton’s Buckman said. “Companies who provide little or no benefits to employees price their services accordingly because there are significant savings in doing that and some companies provide meaningful benefits and incur costs that are reflected in their bill rates.”
In an industry based largely on price, the impacts of healthcare reform could actually level the playing field. “I think this will have a substantial, wide-reaching impact on the competitive picture in the industry,” said Buckman. A uniform standard of healthcare coverage imposed on all guard providers will eliminate the competitive differentiator of benefits offerings and could change the competitive landscape for guard companies.
“It’s almost a tax on the industry in a certain sense. Everyone theoretically will pay more or less the same under the new requirements,” he said. And, those costs will pass through to the customer in the bill rate across the board.
Buckman said it is critical for security directors to understand how this legislation will impact their own program, whether it’s proprietary or contracted. The conversations to start having now should include discussions with providers about anticipated changes in the future and what the provider’s strategic thinking in regards to healthcare reform. “Start having realistic discussions with your provider about the impacts in 2104,” he said.
Healthcare reform could also cause more organizations that currently employ a proprietary security force to seek to outsource their security needs, according to Buckman. Security directors will need to evaluate the cost impact of providing their own officers with healthcare coverage as well as the anticipated increased administrative cost of complying with the new regulations.