Affordable Care Act’s Butterfly Effect

In conversation, a friend often mentions the “Law of Unintended Consequences,” which refers to chain-event related outcomes that may not have been foreseen when an initiating action occurred. It is an extension of Chaos theory’s “Butterfly Effect” that suggests unforeseen linkages such as, “When a butterfly in California flaps its wings, weeks later, a typhoon hits Asia.” From a management perspective, this is “Systems Thinking,” the art and science of making reliable inferences about behavior by developing an increasingly deep understanding of underlying structure, as described by Barry Richmond in 1987 and perfected by Peter Senge beginning in the 1990s. Systems thinking is using the butterfly’s flap to predict and prepare for the typhoon.

I bring this up because the recently enacted Affordable Care Act (ACA) could be the “butterfly’s wing” that eventually causes a “typhoon” of workforce mobility.

Before the ACA, employees typically obtained health insurance by holding a full-time job with an employer who negotiated a health insurance plan and subsidized it as a benefit of employment. Many employees stayed with their organizations out of fear of loss of access to health insurance or due to continuity of care issues. This was especially true in the Government sector, where good healthcare coverage is a key benefit. Prior to the ACA, a break in insurance coverage could cause an individual to be denied new coverage or face very high premiums based on preexisting medical conditions. Leaving a Government job for no or lessor insurance was, simply put, a bad bet.

Now that ACA is experiencing greater acceptance as the law of the land and people are signing up for coverage through state or Federal exchanges, this potentially impacts the relationships between employers and employees. It may motivate Feds to move into the private sector or retire early with confidence that they will be able to obtain health coverage comparable to what they have now.

How has your organization prepared for this change? Have you considered the possible indirect consequences of the ACA on your organization?

• More healthcare options may lead to higher turnover: If you had staff who didn’t want to change organizations under the previous health insurance environment, are they now feeling like they can make a move? Do you have a retention strategy for critical individuals? Is your recruitment capability ready to find people to replace them? Or will you have to recruit less experienced people and grow your own talent? Do you have  a robust enough succession plan to deal with these risks?
• Higher turnover may lead to loss of institutional knowledge: Are you at risk as employees’ knowledge base walks out the door? Are your knowledge management practices defined and documented? Should you implement a shadowing or mentoring program to help with knowledge transfer? Are your employees skilled at collaboration and knowledge sharing or is this a skill they will need to develop? Do you need a knowledge management tool such as software?
• Vacancies and the resultant loss of institutional knowledge may lead to suboptimal mission achievement: Is your organization ready to become a learning organization that embraces employee mobility while still driving high performance and achieving mission results?

Organizations can capitalize on a more mobile workforce resulting from ACA by taking a systems approach to workforce planning, including succession planning, recruiting strategies, and development strategies. Knowledge management is also critical to success. Although Human Resources often directs these programs, their success hinges on line managers and leadership’s ability to build buy-in and execute the plans in their organizations. Leaders need a successor for when they move up. Line managers need to know how to manage for retention.  And everyone needs to have a development plan in place to ensure departures don’t result in new skill gaps. The organization will benefit from the implications of the ACA by:

• Leveraging a More Mobile Workforce: Recruiting employees who may have felt trapped in their existing organization and bringing them into your organization to upgrade your talent or fuel organizational growth. Are your networks robust enough to find and recruit these people? Is your culture flexible enough to accept outsiders and find a way to help them be productive from day one?
• Speeding Phased Retirement and Part-timing: Enabling phased retirement and other part time work arrangements that can allow you to scale to meet your organization’s needs more fluidly. This addresses “brain drain” risks caused by retirement, attrition, or changes in family status.
• Enabling Healthy Attrition: Encouraging existing employees who may have remained with your organization solely for the sake of their health insurance to move on to a better fit elsewhere.
• Improving Knowledge Management: More efficient transfer of institutional knowledge will benefit the organization by freeing up time for innovation in driving mission results.

For employees, it frees up many who were afraid to fully retire or otherwise change their full-time employment arrangements to independent consulting or part-time work because of the implications related to obtaining health insurance. Now people will be able to pursue the kind of work and workload they desire and know that they can still sign up for health insurance coverage independent of their employment status.

2014-2015 should be interesting from a job change perspective. As the economy strengthens, unemployment dips, and the healthcare implications shake out, expect some of your colleagues to explore their options outside your organization, while others may want to join your team.

By anticipating this opportunity and thinking about how it affects the entire organization as a system, you can manage risks, upgrade your talent pool and position your organization to lead into the next decade.

Additional Resources:

• This presentation discussing ACA Adoption Rates in California was posted on 7/30/14
• This post on Vox.com on 7/31/14 explores ACA adoption in Kentucky