Focus On Affordable Care Act Will Help Drive ADP’s sales

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Automatic Data Processing

With the Affordable Care Act timelines approaching and along with it the threat of being penalized for non-compliance, Automatic Data Processing (NASDAQ:ADP) is focusing on  promoting itself as a reliable solution provider that can effectively address the complexities of adhering to the ACA. Most recently, ADP had organized a webcast, wherein it brought forward the most important aspects of the ACA that small businesses need to be aware of and how to deal with them. [1]

We believe that ADP’s focus on increasing awareness about the ACA will help drive sales of its ACA-oriented products. ADP will likely benefit from its position as a major player in the Human Capital Management industry, which will enable it to tap a large market of businesses looking for solutions that will help maintain compliance with the ACA.

See our complete analysis of ADP here

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Employer Shared Responsibility is one of the most important aspects of ACA

In its webcast, ADP had covered a numbers of aspects regarding the ACA such as its applicability, healthcare options and related tax credits. However, the Employer Shared Responsibility (ESR) provision of the ACA is the most important of all. The ESR provision of the ACA requires businesses with 50 or more full-time employees, including full-time equivalent employees, to provide health insurance to at least 70% of the employees in their 2015 plan year. [2] Employers with 50-99 full-time employees, however will be exempt from any penalty due to non-compliance in 2015. Businesses with 100 or more employees need to comply with the ESR provision from January 1, 2015. Failure to comply with the provision will lead to heavy penalties.

ADP offers an ACA Toolkit along with its solutions platforms such as RUN, Total Source, WorkForce Now and Vantage HCM that helps in identifying whether the ESR provision is applicable to them or not. [3] It also helps determine what actions need to be taken to be compliant with the provision.

Large untapped demand will help drive sales for ADP’s ESR related products

ADP had introduced products related to the ACA as early as 2013. However, adoption of these products has been limited primarily due to the lack of awareness. A survey conducted by ADP revealed that only around half of the small, midsized and large businesses in the U.S. are aware of the impact of the ACA and are prepared for them. [4] The complexities behind adherence to the ESR and the delay in implementation dates have also kept potential clients at bay.

This large untapped market presents a huge opportunity for ADP. In order to educate employers about the importance of being compliant with the ESR provision, ADP has been conducting webcasts and putting up articles on its website. ADP is well positioned to cater to these clients given its existing presence in the Payroll and Human Resources outsourcing industry and readily available services designed for the ACA. Higher adoption of its ACA related products will likely help drive ADP’s sales.

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Notes:
  1. ADP Webcast–What Small Businesses Need to Know About the ACA: Actions You May Need to Take Before Year End, November 11, 2014, www.nasdaq.com []
  2. Affordable Care Act, www.hhs.gov []
  3. ADP offers comprehensive Health Care Reform solutions, www.adp.com []
  4. Health Care Reform Is The Big HR Compliance Challenge, www.adp.com []