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    Expert Column: Finding an Obamacare Win-Win for Hourly Retail Workers

    By Joseph Appelbaum , Potomac Companies Inc.

    When it comes to coverage of hourly workers under the Affordable Care Act (ACA) – better known as Obamacare – top management and store-level decision makers in the grocery and food retailing business are faced with a short-term challenge and a long-range opportunity.

    The challenge is meeting the coverage mandate of Obamacare. Under this mandate, large employers with the equivalent of 50 or more full-time workers (transition relief available) must provide health insurance or else pay a $2,000 per employee fine. In addition, large employers that don’t provide affordable insurance to their workers will pay a $3,000 penalty for each employee who gets taxpayer-funded subsidies through a health care exchange.

    For many grocers and other retail food establishments, the question is how to minimize the cost of meeting the Obamacare mandate. Do you pay the fine or pay for coverage? If you pay for coverage, do you provide the bare minimum just to comply? Health benefits might cost the equivalent of $2 an hour extra per employee. In the grocery industry, with its historically narrow margins, that additional cost would have a huge impact on profits.

    But here is another question. Can grocers and other food retailers find a way to use the “stick” of the Obamacare mandate as a “carrot” that will lead to a paradigm shift in which an investment in truly affordable and meaningful health care coverage is a catalyst for improved retention and productivity of hourly employees?

    That is the long-range opportunity afforded by Obamacare!

    No doubt, employee turnover in the retail food industry is notoriously high. A 2010 study by the Canadian Grocery HR Council found that grocery stores had an overall employee turnover rate of 38.7 percent. The cost of losing an employee in an hourly wage scenario is 25 to 50 percent of the annualized income earned by that employee. If your business has 500 employees, this can add up to $1.5 million or more – a tremendous lost opportunity cost.

    Before we look at how to take advantage of the Obamacare opportunity, let’s first examine how to avoid the Obamacare penalties while paying the bare minimum. 

    There is a new type of insurance plan that is designed to protect employers from the first Obamacare penalty and lower exposure to the second. They are the so-called “minimum-value” or “skinny” plans that provide “first dollar” coverage for preventive services such as doctor visits and generic drugs but typically do not cover higher-cost health care services such as surgeries and hospital stays. If hospitalization is covered, coverage is usually a bare-bones benefit of $100-500 per day for 30 to 180 days. Even though this is low-level coverage, it is in compliance with the ACA and helps employers avoid the $2,000 per worker penalty for failing to offer coverage.

    To be “affordable” under the ACA, assuming an employee earns $10/hour, the employer may limit employee costs to no more than $124 a month (based upon a 30 hour week). If the plan the employer chooses is a comprehensive minimum-value bronze plan that requires employees to meet high deductibles of $4,000 or more, then in reality, this is not affordable. What employee in his or her right mind is going to pay $124 a month for limited first-dollar coverage of preventive services only plus the $4,000 deductible for all other health care services?

    While some grocers and food retailers will be satisfied to offer a minimum-value plan that gets them off the hook for paying Obamacare fines, other employers may want to do more to help their employees and, in the long run, hold on to them. For example, the employer could extend the company health plan for salaried employees – with more comprehensive coverage and lower deductibles – to hourly workers with a cost subsidy to keep the employee payout at or even below $124 a month.

    It’s up to the company, by weighing the cost of subsidizing meaningful health coverage for hourly workers vs. the cost of hiring and training new employees plus the lost opportunity costs of employee turnover, to decide how generous it wants to be.  If the company creates a “Paradigm Shift” and pays for health coverage, then their turnover rates will decline.  Moving from a 40 percent to a 15 percent turnover rate could save a 500-employee company almost $1 million dollars per year.  Putting those savings into health insurance and other benefits for employees would create retention previously unrealized by the company, thus increasing profits and value. 

    It’s time to get off the merry-go-round of constant high employee turnover!

    A recent article on the website of the employee search firm KeyStone, as reported by the Houston Chronicle, compares the human resource practices of grocery giants Costco and Wal-Mart to illustrate how differences in employee policy can greatly affect turnover rate, and in turn, profits. Although Costco's employee compensation includes generous benefits and pays its people approximately 65 percent more than Wal-Mart, Costco earns a significantly higher profit-per-employee margin than does Wal-Mart. The reason: Costco has a 6 percent first-year turnover while Wal-Mart's is almost 50 percent.

    Obamacare, for all of its well-documented imperfections, provides a way to make health care benefits part of the employee retention solution for grocers and food retailers – especially when the company goes a bit further and offers an integrated employee wellness program. Even at the $9 and $10 level, it is possible to have happy, healthy and long-tenured employees providing a strong backbone for your food retailing organization. Now that’s a paradigm shift!
     

    By Joseph Appelbaum , Potomac Companies Inc.
    • About Joseph Appelbaum Joseph Appelbaum is the founder and president of Rockville-based Potomac Companies Inc., one of the premier full-service employee benefit brokerage and consulting firms in the Washington, D.C. region. He can be reached by email at [email protected]

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