Of all the figures generated by actuaries and accountants around the Affordable Care Act, perhaps none is more important to supermarket operators and their workers as the number 30.
That is the number of hours an employee must work, according to the law, to be considered full-time and thus qualify for health insurance from their employer. Companies can still choose to offer their insurance plans to those working less than 30 hours a week, but otherwise those workers will need to look elsewhere for coverage.
As companies and their unions prepare for the advent of health care reform in 2014, the issue of health care coverage for part-time employees has become a major topic in negotiations. Many supermarkets have long offered some health care benefits to their part-time workers, but the potential increased costs under the Affordable Care Act — which eliminates limits on annual benefits and mandates similar coverage for all workers — is proving to be a difficult obstacle to negotiate.
In New England, for example, where Stop & Shop has been in talks with several union locals on new contracts covering more than 30,000 workers, the unions say the company has proposed extending coverage for part-timers only until January, when the states are scheduled to have new health care exchanges set up where people who are not otherwise covered will be required to buy their own insurance.
Likewise, the issue of coverage for part-time workers was the most difficult issue to resolve in last year’s negotiations between United Food and Commercial Workers Local 951 and Meijer Inc., both based in Grand Rapids, Mich., according to John Cakmakci, president of the local.
“In Michigan there are a lot of employers who are telling workers they will now be working less than 30 hours,” he told SN.
Under terms of the contract negotiated last year, part-time workers at Meijer can still obtain benefits from the company, “which was a huge thing for our members,” Cakmakci said.
The union and Meijer have agreed to meet again as rules are promulgated around health care reform if opportunities arise to make changes in the plan.
“Relatively speaking, we think we have a pretty good plan in place, and we think we are prepared for the Affordable Care Act,” Cakmakci said.
Next month a contract covering about 4,000 Kroger workers in the Toledo, Ohio, area is set to expire, and health care “will likely be the most time-consuming thing on the agenda,” said UFCW Local 75 President Lennie Wyatt in a statement on the union’s website.
“We expect to work cooperatively during negotiations with our plan professionals to ensure that the legislative regulations are not only clear to us, and to plan participants, but to protect the outstanding health care benefits provided by our union contracts,” Wyatt said.
For the 26 million American workers covered by multi-employer health plans, the challenges of negotiating new contracts as health care reform approaches are compounded.
John T. Niccollai, president of UFCW Local 464A, in Little Falls, N.J., said union locals are fighting to preserve employee-sponsored coverage for their part-time workers in such plans.
“Labor unions, on behalf of their membership, were negotiating benefits for their members long before there was a law that said you had to provide health care coverage,” he told SN. “We probably picked up health care coverage back in the ’50s, and there was no law that said you had to provide health care insurance.
“Now that there’s a law, all of a sudden some people think just because you must provide health insurance to those who work 30 hours a week or more, that there’s no necessity to provide it for those who work less than 30 hours a week.”
“My position is that the unions always provided health care for their members, and so there is no reason we should be precluded from continuing to provide health insurance for our part-timers.”
Niccollai said Local 464A was able to preserve benefits for its members at the largest New York-area chains during negotiations before the Affordable Care Act survived a Supreme Court challenge last year. To do so, the local, which operates a multi-employer health plan covering members at several chains, negotiated two separate schedules of payments, one based on assuming health care reform passed, and another assuming it did not.
Although the Supreme Court’s ruling eliminated uncertainty about whether the law would even pass, many of the rules surrounding its implementation have yet to be promulgated.
“The biggest uncertainty is how the law will be implemented, which makes negotiating a contract that spans from before that implementation to after the implementation really hard,” said Nicky Coolberth, a spokeswoman for the UFCW international union in Washington. “For months they were waiting for the Supreme Court, then they were waiting to see whether the law would be struck down.
“That’s still a problem, because the UFCW and all of our companies want clarity on the provisions of the health law before they can really move forward. The goal is maintaining the best, most affordable coverage for members, and there are no final regulations as they apply to multi-employer funds.”
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Coolberth said the questions about how to implement health care plans with looming uncertainty about the rules have been one of the contributing factors, along with pension plans, in some of the more protracted negotiations recently.
“It’s not uncommon for negotiations to drag on for months or even a year,” she noted. “That was the case in Memphis and Nashville and Southern California and Northern California.”
The protracted negotiations — some of the contracts in Northern California were expired for more than a year before they were finally ratified late last year — are also being impacted by various factors, including the health of individual chains and the economy.
“Sometimes the different markets have different problems that need customized solutions, such as customized pension funds,” Coolberth said. “All of these things are adding to the length of time it takes to settle these contracts.”
Costs of the ACA
A big issue for many of the plans covering supermarket workers is the costs associated with the new law.
Historically, supermarket chains and their unions have been able to mitigate costs by capping annual and lifetime payouts — at $250,000 per year and $1 million lifetime, for example — and by having workers earn increasing levels of coverage over a period of time. Those options will no longer be available under health care reform.
“Now, after three months, everyone has to get full insurance, and it has to be the same for everyone, with the exception of offering family coverage to part-timers,” Niccollai of UFCW Local 464A explained. “So obviously the costs on part-time health care will go up considerably.”
Niccollai said his local worked with health care providers, insurance companies and others to try to figure out what the increased costs of providing health care for part-time workers under health care reform might be, and drew up contracts reflecting those increased costs. In the case of the members of Local 464A, those costs will be borne by the supermarket chains — workers will still receive health insurance with no co-payments.
“There is a need to balance the company’s obligation to take care of the worker with the need to make money, and the scale can’t be tilted completely to one extreme or the other,” Niccollai said. “It has to be balanced, and if it isn’t, the system doesn’t work. The employer has to take care of the employee, and the employer has to make money.”
According to a report last year from the University of California-Berkeley Labor Center, the lifting of lifetime limits and annual limits for insurance payouts will increase the cost of premiums by 0.5% and 0.1% or less, respectively.
The report found that over the longer term, the ACA could potentially decrease premiums, in part due to a reduction in uncompensated care and improved delivery systems.
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“While the average cost per enrollee may decrease, the total cost for some employers may increase to the degree that higher take-up rates result from the individual mandate and the automatic enrollment requirement,” the report stated.
According to another report, the 2012 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care, the annual cost per employee for medical and drug benefits was projected to average just over $11,000 in 2012, with about $8,600 of that cost paid by the employer. The survey polled 512 companies across a range of industries.
About 90% of employers in the survey said they expect that subsidized health insurance would be an “important” or “very important” part of the value they provide for workers in 2014 and beyond. However, the percent that said providing health care would be “very important” declined, to 58% for 2014 and beyond, compared with 71% of employers who said providing health care coverage was a very important part of their offering for workers in 2012.
More than three-fourths — 77% — of employers in the survey said they thought it was “not at all likely” that they would discontinue offering health insurance coverage and seek to shift workers onto insurance exchanges. However, almost half of respondents said it was at least somewhat likely that they would offer insurance coverage only to certain workers, and direct others (such as part-time and temporary employees) to the exchanges.
The UFCW is among a group of unions, which also include the Teamsters, the AFL-CIO and Unite Here, that is pushing for assistance from the federal government to maintain their multi-employer plans. According to a report in the Wall Street Journal, those unions are pressing the Obama administration to allow low-wage workers to obtain federal subsidies to participate in such plans.
“For years now, grocery workers have forgone raises or other things so they could keep those benefits,” said Coolberth of the UFCW. “They keep their jobs because they can count on that health care through those union contracts.
“There is a promise of health care reform, and part of that promise is that if you have good coverage you should be able to keep it,” she said. “Many, many thousands UFCW members have good coverage, that is affordable, that is available through Taft-Hartley [jointly managed multi-employer] plans.”
She and others said so much remains unclear about the regulations for implementing health care reform that it is difficult to figure out what the final shape of health care coverage might be for unionized supermarket operators.
“It’s a very, very, very complicated quagmire that we are involved in, and I defy anyone at this point to be able to explain, from A to Z, what will happen,” said Niccollai. “We are still waiting for some decisions to come down on issues that we are not clear on.”
In New Jersey, for example, he said, Gov. Chris Christie has said the state would not set up insurance exchanges for those people who are not covered by their employers. That means uninsured New Jersey residents would have to purchase insurance through federal exchanges, which would need to be created in the coming months so they are ready to operate by the beginning of next year.
“I really don’t see that happening,” Niccollai said. “What do you do with this whole system of health care if the exchanges are not up and operative? Do you extend it? Provide some kind of stop-gap insurance?
“There is a whole myriad of problems that we haven’t gotten into yet. Every time they run a seminar trying to explain health care reform, they come up with more questions than they solve.”
Part of the challenge of implementing heath care reform, he said, is that the law was crafted in large part without taking unions into consideration.
“There isn’t a local union in the country that doesn’t have questions, and isn’t looking for guidance,” Niccollai said.
Sidebar: Managing ACA Costs
Health care reform is forcing companies to rethink their approach to coverage, employee wellness and workforce management, according to one group that works with employers to manage benefit costs and improve quality of care.
“It’s definitely causing companies to look not only at their health care strategy, but also their workforce management strategy,” said Steve Wojcik, vice president of public policy at the National Business Group on Health, Washington.
This is particularly true in industries like restaurants and hospitality, where turnover tends to be high and margins tend to be low, minimizing the ability to pass higher costs on to customers.
“We have heard from a lot of employers in those types of businesses who are struggling to manage the costs, as well as manage the workforce hours,” Wojcik told SN.
While many employers appear to be willing to continue to offer health care benefits to their part-time workers — those working fewer than 30 hours per week — others are weighing the possibility of letting those workers find insurance elsewhere, such as on the insurance exchanges that are anticipated when the Affordable Care Act takes effect in January.
According to a guide to the Affordable Care Act for labor negotiators issued last year by the University of California-Berkeley Labor Center, the employees at some businesses with large numbers of low-income workers might be better off receiving a wage increase to offset their cost of purchasing insurance on the exchanges than to actually receive the benefits from the employer.
“The suitability of this approach will be highly dependent on the specific circumstances of each workplace,” the report stated. “In general, workers and employers may be better off forgoing group health insurance if the cost to the employer of providing group coverage is more than the cost of paying the penalty and providing wage increases sufficient to enable workers to purchase coverage through the exchange after taxes.”
Wojcik of the NBGH said member companies in that organization have been experimenting with a variety of tools to improve care and minimize costs, including offering financial incentives for wellness and participation in healthy lifestyle activities, such as losing weight or quitting smoking.
“That’s an area where we’ve seen a lot of growth in terms of what employers are doing to control costs,” he said.
Other initiatives include working directly with local health care providers to improve quality of care and make health care more affordable.
In businesses such as manufacturing that have a high concentration of workers in a single facility, it might also make sense to have an on-site clinic, he said, or in the case of supermarkets and drug stores, making their existing on-site clinics available to their workers.
“There’s a lot that unions and employers can work on together, to improve quality and improve the efficiency of health care so we are not stuck with these huge increases,” said Wojcik.
He said one of the potential areas for increases comes from recommendations from the U.S. Preventative Services Task Force, which he said sometimes promotes costly treatments — such as intensive counseling for overweight people — that could add to benefit costs under health care reform.
“That’s part of where the sticker shock is coming from, and it is not always leading to better medicine,” Wojcik said.