By Lauren Weber
Since the Affordable Care Act was passed in 2010, prognosticators have warned that employers would cut workers’ hours as the deadline approached for one of the key provisions of the healthcare reform law: the requirement that employers offer affordable insurance to workers logging 30 hours or more, or pay a penalty.
Now that the Jan. 1, 2014 deadline is getting closer, firms with many part-time or hourly workers are beginning to finalize their decisions on eligibility and workforce scheduling, with a number ofemployers choosing to cut employees’ hours and skirt coverage requirements.
But not every company is choosing that route. The Cumberland Gulf Group is expected to announce Tuesday that it is maintaining or expanding some workers’ schedules to make them eligible for company-sponsored care. Its reasoning: The increased costs for care will pay off in the long run, with better employee retention and customer service.
At Cumberland, which is based in Framingham, Mass., and owns the Cumberland Farms convenience stores and the Gulf Oil brand, an additional 1,500 workers will be re-classified as full-time and become eligible for company-sponsored health insurance in advance of the ACA deadline. These workers were already working more than 30 hours per week, but not the 40 hours previously required for access to the company insurance plan.
“We sketched out all the options, which included paying the penalty or having employees work fewer than 30 hours,” said Ari Haseotes, Cumberland Farms’ president and chief operating officer. The company has decided to make employee satisfaction and retention a corporate priority, and that meant expanding access to benefits. “We’ve been moving in this direction, but the ACA galvanized us to move more quickly,” he said.
Cumberland, which is privately owned, plans to move the newly-eligible employees to a work week of 32 hours or more, and these positions will now be considered full-time. Employees who were working 30 or 31 hours per week will have the option of moving up to 32 hours, and therefore becoming eligible for the company healthcare plan, or moving to 29 hours or fewer, with no company-sponsored insurance. No employees will work in the 30 to 31 hour range after the changes go into effect on October 1, according to the firm.
After that point, Cumberland expects to have 4,500 full-time employees and 2,700 part-time employees. For the part-time employees, Cumberland said it will help them access insurance through state or federal exchanges being created to serve individuals and small businesses.
The primary metric the company considered was its employee turnover ratio. Full-time employees stay, on average, three to four times longer than part-timers do, said Haseotes. Longer-tenured workers deliver a better experience for the customer—especially in the convenience-store business, where the customer is often in a hurry, he added.
“Our people know how to speed a customer through checkout quickly, how to use our ovens to make a pizza or sandwich right.” When turnover is high, he said, customer satisfaction suffers.
Some employers are starting to look at ACA implementation in this broader way, said Dave Marini, vice president and managing director of strategic advisory services at Automatic Data Processing, Inc., the payroll services and employee benefits administration firm.
“Organizations are looking at health care reform legislation as a workforce management and planning issue,” he said. “It goes beyond just cost of benefits to the impact on talent, attraction and retention.”
Haseotes said he expects about 50% of all eligible employees to choose company-sponsored health insurance. Cumberland is adding to its offerings a high-deductible plan that meets the ACA’s affordability and minimum coverage requirements. He said he expects the changes to cost the company “several million dollars.” Cumberland Gulf, which is privately owned, has revenues of approximately $15 billion.