[cover story]

C S P Apri l 201442

C S P Apri l 2014 43

Saving grace or socialism? Law of the land or doomed

to fail? Capitalism or big government?

The polarity and confusion surrounding President

Obama’s Affordable Care Act (ACA) have run rampant since

health-care reform was signed into law four years ago on March

23, 2010.

Mila Spencer knows firsthand. Brought on as benefits man-

ager for La Crosse, Wis.-based Kwik Trip just after the law took

effect, she has had to navigate its mandates while upholding

the chain’s hard-earned reputation of taking care of its people.

“It’s compliance-driven,” Spencer says of the law. “We’ve

always managed our plan well, but now with all the regulations,

it may stop feeling like a Kwik Trip health-care plan.”

Even for a company with resources to address the issue,

Spencer’s job is complicated, she says, particularly regarding

part-time employees working more than 30 hours a week, who

under the ACA are deemed full-time employees.

“We’ve always had part-time benefits and a considerable

number of employees in that 30-plus range, so the potential

increase in cost is a concern to us,” Spencer says.

Also, Kwik Trip is self-insured, which adds to the impending

burden. “We have a 40% profit-sharing plan, so when you look

at a significant increase like that, it impacts the entire work-

force.” She declined to share a dollar amount for the increase.

C-store operators as large as Kwik Trip—which has 11,000

employees and 450 stores—all the way to single-store mom-

and-pops have suffered the extremes of frustration and ambigu-

ity over the new law, with only one thing for certain: The June

This Might Hurt a Little

An examination of what the Affordable Care Act means to your business

By Angel Abcede and Melissa Vonder Haar || aabcede@cspnet.com, mvonderhaar@cspnet.com

C S P Apri l 201444

2012 upholding of the ACA by the Supreme

Court and the President’s November 2012

victory over Republican hopeful Mitt Rom-

ney suggest that “Obamacare” is here to stay.

“There has been a tremendous battle of

sound bites over health-care reform,” says

Nick Tate, deputy heath editor for Newsmax Media and author

of the New York Times best seller “ObamaCare Survival Guide.”

“What’s happening now is some of the practical implications are

starting to play out.”

Tate himself embraced the moniker “Obamacare” because

while opponents initially used the name to demonize the law

and forever tie the reform to its No. 1 backer, he believes it’ll be

Obama’s legacy if history proves the program a success.

Speculation aside, Tate says the law has its pluses and minuses.

On the plus side, certain individuals are clearly ahead: Those

with pre-existing conditions won’t be penalized when obtaining

insurance; those younger than 26 can stay covered under their

parents’ policies without penalty; and several advantages play

out for seniors.

Businesses with fewer than 25 employees can take advantage

of new tax breaks, while those with fewer than 50 employees can

sign on for what may be less costly plans via government options.

But for businesses with 50 employees and more, the picture is

less rosy. Tate admits that in many cases, premiums will rise and

employers will have to make active choices about how to react

when mandates fi nally settle out.

Tate’s advice is to stay calm and focused. “You’ve got to get

beyond the political debate,” he says. “Whether you’re a small,

medium or large business, you can make smart choices to maxi-

mize tax breaks, federal subsidies and other protections to mini-

mize the fi nancial impacts. But you can only do that if you’re an

informed, savvy individual or business.”

It’s not easy, thanks in part to the shaky rollout of the site

healthcare.gov and the program’s initial online enrollment, as

well as the law’s numerous updates and delays.

Some of the most pressing questions include:

▶ With so many delays and changes for both businesses and

individuals, what will the law actually look like when it’s fully

implemented?

▶ Allegedly, 7 million individuals needed to enroll by the

March 31, 2014, deadline for the ACA to be a success. While

numbers have yet to fi nalize, what happens if it falls short?

▶ Should naysayers hold out hope for a repeal or replacement?

Since 2010, retailers have examined any number of ways

to avoid the cost increase the law could bring. In late 2012, the

Huffington Post reported that Royal Farms,

a 155-store chain based in Baltimore, made

efforts to shift all its store-level staff to part-

timers. The chain did not respond to requests

to confi rm the status of its efforts or comment

on that report.

While others have taken less dramatic approaches, the post-

ponements and ongoing uncertainty are keeping everyone on

edge. Some chains, such as Cumberland Farms, Framingham,

Mass., are tapping Obamacare as an employer-of-choice oppor-

tunity, shifting toward a full-time employment plan. In the case

of Tulsa, Okla.-based QuikTrip, it’s improving an already-robust

benefi ts plan.

“Our employees follow the news, they hear about other

companies cutting back hours—QuikTrip’s not doing that, so

it’s a huge morale booster,” says company spokesperson Mike

Thornbrugh. “The only reason QuikTrip is successful is because

of our employees. We’re going to take care of them regardless of

what the federal government does.”

Gus Olympidis, president and CEO of 60-store Family

Express, Valparaiso, Ind., says, “Our strategy, our inclination

is [to] stay the course, to differentiate ourselves by delivering

a package that is better than average. Obamacare creates an

equalizing effect on a certain level. How are we going to be better

than the better players, who are also in search of better people?

At this point, we’re currently putting everything on hold. We’ve

got time now. No decisions have been made at this point.”

Meanwhile, others are seeking a balance between cost and

employee turnover.

“Going forward, we will look at health care and its costs every

year,” says David Crawford, vice president of operations for Las

Vegas-based Green Valley Grocery, which to date has offered

health care to full-time employees. “We’ll try to do what is best

for our employees, our business and our customers.”

You Are HereThe ACA is defi nitely a moving target. A quick review of just a

few ongoing developments at press time show the numerous

and seemingly arbitrary changes occurring with each passing

week, touching on the fl ux in deadlines, the program’s tenuous

progress and even the elements within the law itself.

Easily the most c-store-relevant adjustment has been the

fl uctuating deadlines for the employer mandate. Businesses with

more than 50 employees were initially told they’d have to offer

coverage to anyone working more than 30 hours a week once

the majority of health-care reform went into effect Jan. 1, 2014.

You’ve got to get beyond

the political debate.” “

C S P Apri l 2014 45

That deadline has now changed

multiple times. The fi rst delay came last

July, when the Obama administration

announced it was pushing the employer

mandate back by one year.

In a written statement on the Trea-

sury Department’s website (where the

delay was fi rst announced), the admin-

istration said the decision was made to

accomplish two goals: “First, it will allow

us to consider ways to simplify the new

reporting requirements consistent with

the law. Second, it will provide time to

adapt health coverage and reporting sys-

tems while employers are moving toward

making health coverage affordable and

accessible for their employees.”

That date was further pushed back in

February 2014, when it was revealed that

companies with 50 to 100 employees will

have an additional year (until January

2016) to offer coverage, and companies

with more than 100 employees would

have to cover only 70% of workers in

2015 (as opposed to 95%). It was also

announced in February that employers

would have to provide certifi cation that

they did not drop workers in order to

avoid providing coverage.

Of course, by the time January 2016

arrives, retailers could be dealing with

a drastically different law—and costs—

than what’s on the books today. Other

updates are occurring as news about the

ACA’s execution emerges and measure-

ments of success become known.

Measuring UpThough there are plenty of “back-ups” in

place to ensure Obamacare works, regard-

less of signups, the Congressional Budget

Offi ce (CBO) originally had set the goal of

7 million insured by the end of the open-

enrollment period on March 31, 2014. That

fi gure later dropped to 6 million and, as the

deadline approached, the administration

Calculating the Scope of ObamacareThe Affordable Care Act (ACA) has probably been one of the most divisive and con-

troversial pieces of legislation to come about during President Obama’s administration.

Here are a few statistics collected by the Associated Press that explore that divide, as

well as its potential.

81% Young Democrats who approve of the Aff ordable Care Act, according to

a December 2013 poll by Harvard’s Institute of Politics

58%Young Democrats who approve of “Obamacare,” which is the same thing

55 millionEstimated number of uninsured in America

31 millionRemaining number of uninsured in America in 2016, when most of the law’s provisions

will take hold, according to federal projections

14States that set up their own health-insurance exchanges

36States that refused, leaving the federal government to do it

Source: Associated Press

Young Democrats who approve of “Obamacare,” which is the same thing

C S P Apri l 201446

backed off the goal altogether.

Shying away from that number is

understandable. As of late February,

about 2 million more people would have

needed to sign up in order to be deemed

“a success.” Part of the slow reception can

be attributed to the disastrous rollout of

healthcare.gov’s online system, which

experienced multiple crashes and frustrat-

ingly long wait times in its first months.

Beyond the potential failure to hit the

broader goal of 6 million to 7 million (the

final figure had not been reported as of

press time, though by early March signups

were said to be above 4.3 million) is the

deeper concern about who has signed up.

For the system to work properly, it’s crucial

that a decent percentage of younger, health-

ier individuals are enrolled and enrollees are

actually paying their premiums.

The age ratios are at best concerning,

and at worst disastrous.

According to U.S. Department of

Health and Human Services (HHS) data,

only 24% of Americans who enrolled in

ACA plans during first three months of

enrollment were in the coveted 18-to-

34 age bracket; by comparison, 55% of

enrollees during that time were 45 to 64,

an age bracket just shy of Medicare eligi-

bility and significantly more risky.

Knowing the 18-to-34 bracket would

be more difficult to attract, both because

of generally better health and feelings of

invincibility, ACA ads targeting this set

flooded the market in 2014. That led to

a 65% increase in January signups, but

healthy, younger individuals still only

accounted for roughly 25% of the 4 mil-

lion ACA enrollees.

As troubling as the age gap may seem,

measures such as risk corridors, reinsurance

and risk-adjustment programs have been

built into the law to ensure that—at least

in the early years—healthy individuals are

not paying increased premiums to cover the

high cost of older or sicker enrollees.

No, analysts say the more important

metric in the early success of the ACA

is one that is not yet measurable. In a

February interview with USA Today,

Washington and Lee University law pro-

fessor and health policy expert Tim Jost

suggested that the true impact health-

care reform will have on insurers will be

known only once officials have a better

idea if new policyholders are actually pay-

ing for their insurance plans.

“If nobody shows up, that will have

serious consequences in the risk pools,”

said Jost.

To date, the HHS has data only on

how many people have enrolled, not how

many have paid. Jost believes that 2015’s

premium rates will provide a better pic-

ture of how well the ACA is working.

“Are there insurers who drop out of

the exchange because they can’t make a

go of it?” he said. “Or do insurers jump

in if things look pretty good?”

Repeal, Replace?The questions don’t end there. Bigger

changes may surface as different parties—

some within Congress, others on the state

level—attempt to repeal, replace or amend

the law. These efforts include:

▶ Repeal: In Congress, a Republican

majority continues its attempts to repeal

or derail Obamacare. March 5, 2014,

marked the 50th time the GOP passed a

bill doing just that. Previous attempts have

failed, though Republicans have vowed

to make Obamacare a centerpiece of the

midterm elections. A full repeal may seem

unlikely, but could a Republican landslide

in 2014 change the discourse?

▶ Replace: Republicans are also look-

ing to put forward a more conservative-

friendly alternative to the ACA. House

Speaker John Boehner hinted at the impor-

tance of a Republican plan for health care

during a January House GOP retreat, and

the House Ways and Means committee had

initiated an effort at press time.

▶ State Battles: When the Supreme

Court ruled in favor of the ACA, it also

ruled that states could opt out of the

Medicaid expansion part of the law.

Many red-leaning states have done just

that (though a number of states who

once refused Medicaid expansion have

reconsidered, thanks to the hearty federal

funds to support the expansion). Other

states have passed strict laws about health

exchanges, making it exceedingly difficult

for individuals to sign up. It’s a situation

that varies from state to state and will

undoubtedly continue to evolve.

Inevitably, each individual result could

affect local retailers. “I tell everyone: Hope

for the best, plan for the worst,” says Tate.

Fundamentally SpeakingThe much-publicized, bottom-line

requirement of the law is that employers

with 50 or more full-time workers will have

to pay for health insurance or drop their

coverage and pay a fine of up to $2,000 per

worker per year to the federal government.

What’s probably less known are the

many standards to which these employer

plans must comply to be sanctioned by

the government. Tate has outlined a few

of what he considers “strict” criteria:

▶ Minimum Actuarial Value: Com-

pany insurance plans must have a mini-

mal “actuarial” value of 60%. This means

60% of an employee’s medical expenses

must be covered under the insurance

policy offered. So of all the dollars going

to an insurer, that insurance company

will have to cover at least 60 cents of every

dollar of a person’s medical expenses as

part of holding those policies.

▶ Deductible Limits: For individual

and small-group plans, the law limits

deductibles to $2,000 for an individual

C S P Apri l 201448

and $4,000 for a family.

▶ Affordability: Premiums can’t be

higher than 9.5% of the worker’s total

gross income (i.e., not household income,

as the law originally stated).

If plans don’t meet these criteria,

employers face a $3,000 penalty (higher

than the $2,000 per worker if the company

offers no plan at all) for every worker who

buys insurance from an Affordable Insur-

ance Exchange and gets a federal subsidy.

Some stipulations come in the form of

added taxes, basically addressing perceived

inequities in how companies cover certain

employees. Here are a few of those cases:

▶ Companies offering expensive

“Cadillac” health plans will pay new

taxes on them, starting in 2018. Under

the law, an employer offering a plan with

a premium that costs more than $10,200

for an individual ($27,500 for a family)

will pay a 40% excise tax on the amount

exceeding the threshold.

▶ High-wage earners will face

increases in Medicare taxes and net

investment income. Under the new law,

the Medicare Part A (hospital insurance)

tax rate rises by 0.9% (from 1.45% to

2.35%) on wages of more than $200,000

for individuals and $250,000 for married

couples filing jointly. Obamacare also

imposed a new 3.8% tax on net invest-

ment income (exempting home sales for

a primary residence) as of Jan. 1, 2013.

▶ Tax-free fl exible spending accounts

offered by many companies will face new

restrictions, including a $2,500 cap per

calendar year. Those with health savings

accounts will also pay higher penalties

for using that money for non-medical

emergency expenses, making them less

desirable (with the tax penalty rising from

10% to 20%). Health-care deductions will

also take a hit. Taxpayers will have to docu-

ment out-of-pocket medical expenses that

are at least 10% of their income to itemize

those expenditures on their taxes. Folks

who exceed the new ACA limits on capital-

gains taxes will also pay more in taxes.

Other mandates cover dependents of

workers, seniors and young people under

26 who can find alternative coverage,

fi nes for companies that “cushion” their

plans to account for workers with pre-

conditions and even a tax on companies

that purchase “fully insured products.”

Opting In, Up and OutOne of the effects of Obamacare will inevi-

tably be higher enrollment in whatever

plan a company provides, Tate believes.

The very nature of the policy encour-

ages it, with the main driver being the indi-

vidual mandate. Under the new law, every

American is required to have insurance

through some means as of Jan. 1, 2014, or

pay a tax to the Internal Revenue Service.

That tax amounts to $95 per year or 1%

of modified adjusted gross income per

individual next year, whichever is greater

(up to a maximum of $285 per family).

In 2015, the tax rises to $325 or 2% of

income per individual (maximum fam-

ily penalty: $975). And in 2016, it scales

up to $695 or 2.5% income per indi-

vidual (maximum per family: $2,085).

The government will likely collect the

money by deducting it from people’s tax

returns, Tate says.

The ultimate goal is to encourage

people into preventive care. People who

are insured are more likely to manage their

health care better, heading off the likeli-

hood of costly treatments later. It’s a strong

argument, says Tate. Other countries with

similar national policies spend far less on

health care than the United States does.

Thornbrugh says QuikTrip—which

not only offers health-care plans to full-

time workers but also has onsite wellness

centers for any employee (and their fami-

lies) and provides 30 different prescrip-

tions free of cost—has already reaped the

benefi ts of encouraging preventative care.

“The cost benefi ts are huge,” he says. “If

we can catch a lot of problems or illnesses

early, it not only helps the employee, but

they get back to work quicker.”

While analysts expect millions will

remain uninsured, even with the full

implementation of Obamacare, most

say these provisions will result in 95% of

legal residents having insurance by 2016.

For employers offering health benefi ts,

Tate says that day will have brought with it

a surge in enrollment and increased costs.

The larger intent was to lower overall

costs, but for businesses, that may not

be the case. Tate says the law contains no

cost-control provisions that will reduce

health-care expenditures or hold down

premiums in the short run. In fact, two

independent studies of health-care

spending and insurance premiums indi-

cate both have continued to rise since

Obamacare was signed into law in 2010.

In 2011, spending on health care rose

“The only reason

QuikTrip is successful

is because of our

employees. We’re going

to take care of them.

“

C S P Apri l 201450

4.6%, up to $4,547 per person on average,

says Tate, citing the nonpartisan Health

Care Cost Institute. It rose again in 2012

by a similar amount and was projected to

increase by about the same level in 2013.

In terms of employer-sponsored insur-

ance, an individual policy averages about

$5,884, with the individual’s share $999

and the employer’s $4,885, according to

the latest projections.

At the same time, insurance premiums

climbed 9% on average for a family in

2011—double the rate of wage growth—

to $15,073 in 2011 for employer-provided

plans, according to the nonpartisan Kaiser

Family Foundation. In 2012, they rose by a

more modest 4% to $15,745. And last year,

Tate says, they’re up, to about $16,351.

Giving a bit of context, the cost-of-

living increases annually calculated by the

U.S. Social Security offi ce run far below

these health-care increases: 0% in 2011,

3.6% in 2012, 1.7% in 2013 and this year

projected at 1.5%. Simply put, health-

care costs are rising two, three, even four

times as fast as the nation’s standard cost

of living.

For Spencer of Kwik Trip, the law in

many ways “encourages businesses to get

rid of employer-sponsored plans,” which

from the employee feedback she has heard

means confusion and worry. “They’re con-

cerned in that they always relied on the

Kwik Trip health plan being here.”

She credits the company for continu-

ally communicating with its employees to

calm those fears. And now that the govern-

ment has delayed the compliance date, the

company has time to continue to evolve

its plan. Since 2010, the chain has worked

with a third-party actuarial fi rm to better

address its full- and part-time options.

Small-Company ComplianceThe picture is different for smaller com-

panies. Obamacare provides employers

Creating a Healthy CultureAs some retailers look to cut back full-time employees to manage the impending

employer mandate of the Affordable Care Act (ACA), others have gone in the other

direction, putting employee-driven health and wellness programs at the center of their

company culture, regardless of what the government requires.

Cumberland Gulf Group: “It’s not just a smart thing to do—it’s the right thing

to do.” This is what Ari Haseotes, president and COO of Framingham, Mass.-based

Cumberland Gulf Group, said of the decision to offer more than 1,500 employees

health-care coverage beginning Oct. 1, 2013—more than a year before the 600-store

retailer needed to do so under the ACA.

QuikChek: “We are committed to being a great place to work … and part of that

investment is to have a wellness strategy to achieve a healthy workforce,” says Quick-

Chek CEO Dean Durling. The Whitehouse Station, N.J.-based chain offers its full-time

employees medical, dental and vision plans; fi tness-center reimbursement; discounts

on fruits and salads to encourage healthy on-the-job meals; free fl u shots; and a “Fit

for Life” wellness program that encourages employees to improve their health through

risk assessments and annual physicals in exchange for a discount on medical plan costs.

Kwik Trip: “Our co-workers are our No. 1 asset, and if they are your No. 1 asset,

then you make sure that you put your time and resources into taking care of those

people,”said Kwik Trip corporate communications manager John McHugh of the

January 2014 opening of an on-site health clinic, just the latest commitment in caring

for its employees, and perhaps reducing the company’s health-care costs at the same

time. Located at Kwik Trip’s La Crosse, Wis., headquarters, the clinic will service about

3,000 area employees, with online resources for 8,000 additional team members.

Sheetz: “With escalating health-care costs, we were looking for a way we could

provide a program for our employees that could help control health-care costs.

Our goal is to create a culture of ‘Shwellness,’ ” says Bill Young, Sheetz’s director of

compensation, benefi ts and risk. The 10,000-square-foot, $3.5 million Sheetz Health

and Wellness Center in Altoona, Pa., offers employees and their families primary care,

health assessments, lifestyle coaching, disease management services and an impressive

4,300-square-foot fi tness center.

QuikTrip: “We don’t ask what it costs. … The bottom line is everyone is healthier, and

the cost to us is irrelevant on the back side.” This is how Mike Thornbrugh, spokesper-

son for the Tulsa, Okla.-based retailer, responded in the wake of the 2009 opening of

QuikTrip’s second on-site employee health clinic—nicknamed “Doc in the Box”—in

Belton, Mo. “No matter what Congress decides, we’re going to do this,” he said. “No

offense to elected offi cials, but at QuikTrip, we think we know what our employees

want and expect, so we’re going to go forward with what we’re doing regardless.”

C S P Apri l 201452

with 25 or fewer workers new tax breaks

if they cover their health insurance. The

credits amount to 35% of what employ-

ers now pay for health-care premiums.

That tax credit rises to 50% in 2014.

Small companies—those with fewer

than 50 employees in 2014 and fewer

than 100 in 2016—will be able to take

advantage of new Small Business Health

Options Programs (SHOP), offering

lower-cost health insurance plans as part

of the Affordable Healthcare Exchanges.

The SHOP plans are projected to have

lower premiums than small businesses

have historically been able to negotiate,

once they become fully operational in all

50 states. Currently, only one such plan

exists, giving rise to speculation of further

deadline delays, Tate says.

All plans offered through the exchanges

are required to meet specific “essential

health benefits” designated by the fed-

eral government in 10 broad categories,

including maternity care, mental-health

services, prescription drug coverage,

pediatric care and hospital treatment. The

plans come in four varieties: Bronze plans

have the lowest premiums, but also offer

the lowest amount of coverage at 60%

of medical costs on average; Silver, 70%;

Gold, 80%; and Platinum, 90%.

An estimated 26 million people will

also qualify for federal tax credits to

help defray the costs of those plans. For

instance, families and individuals who

earn too much to qualify for Medicaid

but less than 400% of the poverty level

will qualify for a subsidy next year.

All that said, small businesses will

certainly feel the heat in the bigger pic-

ture, says Tom Robinson, president and

CEO of 34-store Robinson Oil Co., Santa

Clara, Calif. Those with fewer than 50

employees will still have to compete in

the labor pool with companies with bet-

ter health-care packages, he says. In addi-

tion, talks at the state and federal level to

increase minimum wage is among many

other issues hitting small businesses on

top of Obamacare.

“We keep wondering why the jobs

market doesn’t get better as fast as we

expect it should,” he says.

Ultimately, Robinson says he wants

Obamacare to work. “I’m not against the

idea of improving coverage, cost contain-

ment, better quality insurance at a better

price. … That would be ideal,” he says.

“I’m not negative—just not terribly opti-

mistic I’m going to get the desired effect.”

Knowing Where You FallFor retailers hoping to make sense of the

C S P Apri l 2014 53

law, the best place to start is knowing

what category of employer a retailer falls

into—25 or fewer workers, 50 or fewer, 50

to 99 and 100 or more.

That delineation may sound straight-

forward, but of course, details of the

law are never simple. The complexity

shows up in two areas: the definition of

a full-time employee and the concept of

full-time “equivalent.” So far, full time

has meant any employee working more

than 30 hours a week. However, at press

time, the House Ways and Means Com-

mittee approved a bill to define full-time

employees as working an average of 40

hours a week. How far the measure will

go to affect the law is unclear.

In the meantime, being clear about

the 30-hour requirement is an impor-

tant detail, because there are gray areas.

In some cases, an employee’s hours can

fluctuate week by week. In that instance,

an average over 12 months is a good

measure, says one health-care con-

sultant. If over the year the employee

works more than 30 hours on average,

then he or she is full time.

The real concept to grasp is that of

a full-time “equivalent,” says Jeff Kirke,

vice president of Holmes Murphy and

Associates, a health-care broker based

in Des Moines, Iowa. An employer may

have less than 50 full-time workers and

several part-timers. But two employees

working 15 hours can add up to a single

full-time person, thus triggering the full-

time “equivalent” scenario and bumping

the employer into the next bracket.

Whatever the case, “employers will

have to make a decision,” Kirke says. “But

it’s a core-beliefs discussion. You don’t

have to offer benefits today, but a lot are

because they want to be an employer of

choice.”

Indeed, for many businesses, the

new law merely laps up against formi-

dable packages they’ve already imple-

mented. In Honolulu, for instance,

employer mandates have been in place

for years, so Aloha Petroleum officials

say they already provide coverage to all

full-time employees. “This does raise

our costs,” says Richard Parry, president

and CEO of Honolulu-based Aloha.

“But it provides a valuable benefit to

our employees.” n