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Retailers Have Time to Prepare for Health Reform

Retailers Have Time to Prepare for Health Reform

For supermarket operators, the new health care legislation is a little like a visit to the doctor — they don't know yet what potential problems might be discovered, and then of course they'll get the bill to pay in the end.

But just as individuals can exercise some control over their own personal health, food retailers will have the ability during the next several years to find ways to reduce the potential negative impacts of the Patient Protection and Affordable Care Act.

“Since many of the provisions of the bill don't kick in until 2014, we imagine that the benefit specialists at chain food retailers will be closely examining the bill to determine what opportunities they might have for further cost containment,” said Barry Scher, a principal in Washington-based consulting firm Policy Solutions and a former longtime legislative policy specialist at Ahold and its Giant of Landover, Md., chain, in an interview with SN last week. “Now that it has passed, businesses have the opportunity to look within their own house and do what they can do for cost containment and work with their insurers.”

Scher, who was a key proponent of a 2005 bill in Maryland that would have mandated that retailers provide a minimum level of insurance for their workers, said Policy Solutions believes that most large, unionized supermarket chains will suffer little from the legislation. Instead, small chains of about 10 stores or fewer — but which employ more than the maximum 50 employees to be exempt — could face the biggest challenges from the new bill.

Investment banking firm Morgan Stanley last week issued a report on the potential impact of health care reform, and cited a mixed prognosis for retailers. Supermarket operators could face some tough negotiations with unions, the report said, but drug store operators — and presumably supermarkets with pharmacies — could see a bump in sales as a result of all the newly insured people who could be buying prescriptions they previously could not afford. (SN's online subscribers can click here for a story on the Morgan Stanley report.)

As Scher pointed out, however, the full impact of the legislation might not be known for some time because federal regulators still need to write the rules and regulations that will govern how the law is implemented.

“These rules and regulations can take many twists and turns,” he said.

In addition, all businesses will likely feel the effects of the tax burden imposed by the legislation. That could be offset to some degree by reduced costs of insurance premiums for both individuals and businesses, Scher noted.

One bit of advice he offered for retailers seeking to cut their costs was to emulate the practices of Pleasanton, Calif.-based Safeway, which has long advocated health insurance reform that takes individual responsibility into consideration.

In fact, as reporter Elliot Zwiebach notes in the Morgan Stanley story, part of the new legislation was modeled after the successful incentive-based health insurance Safeway provides for its non-union workers.

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