How the Affordable Care Act Could Affect Contract Security

By Ralph Brislin, CPP

The $140,000 annual fee for ABC was calculated with the fine of $2,000 per full-time employee, with the first 30 employees exempt under the law. In this example, ABC would want to try to recover their additional expense of $140,000 annually which equates to $0.67 per hour billing rate increase for all hours worked. Obviously, this average could be greater or less than $0.67 per hour, depending on the size of the contract or the number of officers used. A contract security company with 500 employees using the same example would want to recover their additional annual expense of $940,000 for a $0.90 average bill rate increase for every hour worked.

If a company is currently subsidizing health insurance premium costs in the form of a direct bill from the contract security company, the impact from the new law will not be as great. But healthcare will need to be monitored by the client company in the same way as liability insurance.

Having worked the past several years as an owner of a large Midwestern security company and now as a consultant, my experience has been that fewer organizations are allowing for security contractors to bill for a major medical insurance plan. It is unclear whether this trend will continue if the healthcare law takes effect. But it seems inevitable that one way or another at least some of the increased healthcare costs will be passed on to clients.

Security companies and clients in Massachusetts have been operating under a state imposed health insurance reform law since 2006. Their experiences offer a clue to what may happen nationally. One Massachusetts contract security firm stated that their healthcare costs increased by 30 percent in 2007, with 10 percent annual increases in subsequent years since the mandate. The company passed some of the cost on to their clients.

The same may hold true for the federal law. Some clients may simply absorb the cost of the healthcare reform. Those with contracts with only one or two officers per shift, for example, might see their annual costs increase between $8,000 and $16,000. They may simply accept that this is the cost of doing business.

Providers may eat some costs, however, not all providers will be willing or able to absorb all of the costs. Fixed contracts may be voided because increased healthcare costs were not factored in. Client companies, especially those who deal with purchasing agents, will see their contracts rebid regardless of their level of satisfaction with their current provider because of the anticipated increase in cost.




Great points on the healthcare situation. Also I would like to add that companies need to make sure that their client agreements have language in them to pass on these additional mandated costs to the end user if need be.



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