Nearshore Americas

BPO Providers Anticipate Big Windfall as ‘ObamaCare’ Threatens to Drive Jobs Offshore

The so-called “ObamaCare” law, set to go in effect next year, has the potential to become a huge win for the global BPO industry – but the devil is in the details depending on how U.S. employers react to the new mandate. Many large employers have announced their intentions to limit employment due to the new law’s requirements—and has created a potential bonanza for  outsourcing providers seeking to expand business functions support for corporate business services previously residing ‘in-house’ 

Obviously, the prospect of employers seeking to reduce exposure to these mandates, especially for those employing a large number of entry level professionals such as domestic customer service representatives, causes any prudent executive to examine options, including outsourcing certain work functions to reduce or eliminate exposure to the potentially onerous mandates of the health care initiative. This shift in business has some sell-side executives considering the opportunities.

Two weeks ago, the Obama White House announced a delay for one year the requirement that employers with more than 50 workers provide health insurance to all workers working more than 30 hours per week.

Already, outsourcing firms are reaping the benefits of the upheaval created by ObamaCare. Vangent, an outsourcing firm purchased by defense conglomerate General Dynamics in 2011 was awarded a $530 million 1-year contract to set up call centers dedicated to answering public inquiries regarding the insurance exchanges mandated by ObamaCare in the 34 states where the federal government will play a role in managing the exchanges.

BPO Sectors most likely to benefit from ObamaCare: 

  • EMR/EHR – electronic medical record processing
  • Traditional IT – due to additional HIPAA 5010 compliance mandates
  • Call Centers – handling enrollment processing & patient service
  • Pharmaceutical outsourcing – Pharma market growth
  • Finance & Accounting BPO – Growth in market size thus transaction volume

In his insights provided to Nearshore Americas, Everest Group Vice President Rajesh Ranjan notes that not only is the business opportunity provided by Obamacare in the disincentive to domestic employers but also in the increased regulatory and administrative regimes mandated by Obamacare.

“We see the healthcare reforms helping to increase the BPO adoption across multiple constituents – employers, carriers (insurers), and providers (hospitals, etc.). This will result in increased growth of three specific BPO markets – Health & Welfare Benefits Administrative Outsourcing (targeted towards HR/benefits side of any org), Healthcare BPO (targeted towards Insurers), and Revenue cycle management (targeted towards providers),” said Ranjan. “The common drivers for BPO adoption in these areas are essentially three – a) Reduce administrative burden b) Manage increased cost, and c) Better manage the implementation of this mandate.”

As attorney William Bierce of Bierce & Kennerson, P.C.  predicted in November of 2010 in an article he wrote for the Outsourcing Law Newsletter, “Quite literally, it is built upon a tax on business and a tax on individuals.  Accordingly, it is predictable that ObamaCare will accelerate offshoring and globalization of talent pools of enterprises large and small.”

A Gallup poll conducted in April this year indicates the level of fear and discontent within the US business community regarding The Affordable Care Act (ObamaCare). According to Gallup:

“When asked if they had taken any of five specific actions in response to the ACA, 41% of small-business owners say they have held off on hiring new employees…One in five (19%) have reduced their number of employees and essentially the same number (18%) have cut employee hours in response to the healthcare law.”

What ObamaCare Means for U.S. Employers

Large employers offering full health coverage to all employees are not affected. For employers offering limited coverage, the employers must pay a penalty of $3,000 per employee, per year, that purchases health insurance from a government-sponsored exchange. For employers offering no health coverage, there is a penalty of $2,000 per employee, per year, after 30 employees, even if only one employee purchases insurance through a government sponsored exchange.

Not everyone is convinced. Gustavo Merchan, Vice President at Beesion Technologies, a service provider with operations in Florida and South America doesn’t expect big changes. “We don’t see that ObamaCare will significantly alter our decisions to hire more or less staff, whether here or offshore. We already provide good health insurance benefits to our employees, so, as far as I understand, ObamaCare won’t impose additional costs on us. For a company of our size and stage, hiring  decisions are made mainly due to varying economic activities and business success, and not so much due to those kinds of variables. However, I can see how the opposite is true for other companies whose operations rely heavily on labor forces such as the manufacturing sector.”

“Overall I think companies are still looking for value in other countries as far as IT talent and services are concerned and since it is becoming very hard to tell what is domestic and what is outsourced, most firms will go with value and deal with those who can offer them options,” adds Miami-based outsourcing consultant William Lopez.

This last-minute postponement of the bulk of the ObamaCare employer mandate has been announced, but the mandate is still slated to go into effect after the mid-term 2014 Congressional elections. Whether one takes the cynical view that such a move was politically motivated, or due to the complexity and challenges of implementation, executives on both the buy and sell side of the BPO equation should consider the perils and opportunities that ObamaCare creates, and pay close attention to what this means for the nearshore BPO industry.

Loren Moss

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