For large retail and restaurant chains, the big unknown in the year ahead is how much more they'll pay for health coverage. Employers with 50 or more workers who put in 30 hours a week will be required to provide health care coverage or pay a fine, under the Affordable Care Act, also called the ACA or Obamacare.
(Photo by Mario Tama/Getty Images)That lower full-time threshold is one of the big issues business groups are trying to negotiate with the Obama administration as the rules are being finalized. Large chains like Dunkin’ Donuts parent firm Dunkin’ Brands argue that full-time status should remain based on the traditional 40-hour work week.
“We believe that the definition of a full-time employee, and the number of hours a full-time employee works each week, should be consistent with existing Federal and State laws, and we have communicated this to the Administration,” explained a Dunkin’ Brands spokesperson in a written statement.
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At upscale grocer Whole Foods, workers who put in 30 hours a week already get full health benefits. Still, John Mackey, co-founder and co-CEO of the grocery chain, said the company may still be forced to reconsider its full-time staffing levels, because the proposed rules include more expensive benefit requirements.
"Say we're paying $3,200 a year for insurance for somebody, and the new regulations cost us $5,000 to insure somebody. If they work fewer hours, we just saved $5,000 per person" because there is no mandate to provide coverage for part-time workers, he explained.
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But high-profile chains are treading carefully on the issue of hours, leery of a backlash from their customers.
Darden Restaurants, with 45,000 workers, experimented with cutting back on full-time staffing at some of its restaurants last fall. After a good deal of negative publicity, the chain said it would not change its staffing in 2014.
"We have always had a significant number of full-time employees, and they are integral to our success," said Darden chairman and CEO Clarence Otis in December. "The data we have collected during our test around guest satisfaction and employee engagement has only reinforced this."
Rules Still Not Set
The Obama administration is expected to finalize the new rules by spring. So far, Neil Trautwein, Employee Benefits Policy Counsel at the National Retail Federation (NRF), and others have said officials have been responsive to business concerns about the details.
"We've made some progress on the question of variable workers," Trautwein said. It's likely the final rules will include a one-year, look-back period of an employee's weekly hours to determine full-time status, so that the mandate isn't triggered for seasonal workers.
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Health plan requirements are expected to include more benefits than what many retailers and restaurant chains now offer hourly employees, under tighter cost-sharing rules. The employee's share of the insurance premiums can't be any more than 9.5 percent percent of their income.
"Brought down to its lowest level, it's going to increase the cost of compensation," Trautwein said. "That may make employment more expensive, and could serve as a drag on employment in a job-hungry economy."
"There's going to be a lot of complexity," added Trautwein.
Even after the rules are finalized, Patrick Doyle, chairman and CEO of Domino's Pizza (DPZ) said companies will still be grappling with a lot of unknowns this fall.
"A lot of it we won't know until we go through the year-end enrollment," he said, adding a big question is "how many people decide to take health care vs. going into the exchanges at the state level."
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Some low-wage workers will qualify for Medicaid coverage through state health insurance exchanges, if their state takes part in the Medicaid expansion. The Supreme court let states opt out of that part of Obamacare.
A number of governors in Southern states have said they will not take part in the expansion. Employers may be required to help provide coverage for workers in states that opt out of Medicaid.
Penalties vs. Plan Costs
In the end, the ACA may not stop the trend of employers dropping heath care coverage. Big firms may opt to pay the penalty of $2,000 for each full-time worker instead of funding costly plans.
In its latest budget projections, the Congressional Budget Office calculated that 7 million workers will lose employer coverage between 2013-2022, while the government will collect $13 billion more in revenue from employer fines.
Buffalo Wild Wings (BWLD) CEO Sally Smith said she's not planning to drop health care coverage, but she will be watching worker hours more closely.
"I think we'll continue to refine our labor model," Smith said. "I think you'll see labor software coming out to help restaurateurs and retailers meet the demand for the hours, as well as what our team members need."
Even Obamacare critic Mackey isn't ready to drop coverage, but says something will have to give in the benefits equation.
"That just means there's less we can pay for wages," he said. "If you take it out of one bucket, it's got to go from somewhere else.
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