The Price for Retail and Hospitality

Dealing with the new definition of a full-time employee is one of the biggest challenges organizations will face in 2014 when most of the new healthcare-reform law goes into effect, experts say.

Monday, September 10, 2012
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How big of an impact will "Obamacare" have on your company's bottom line? That may depend on what type of organization yours is.

If you employ lots of low-paid, part-time employees, you can expect your company's healthcare costs to go up at a sharper rate than if you employ lots of well-compensated, full-time workers. That's according to a recent Mercer survey of 1,203 employers on how they expect the Patient Protection and Affordable Care Act to affect them.

More than 60 percent of the employers expect the healthcare-reform law will result in some increase in cost, while one third of those expect cost increases of 5 percent or more. Nearly half the employers in industries with large part-time populations -- retail and hospitality -- expect PPACA to increase their healthcare costs by 3 percent or more in 2014, when many of the law's provisions go into effect.

Approximately one-third of employers in these industries said they don't know what the law's impact will be on their healthcare costs.

One of the biggest impacts of the new law is its definition of "full-time employee," says Tracy Watts, Mercer's U.S. healthcare-reform leader.

"The 30-hours per week threshold is a bit lower than the threshold that many employers use to define someone who's full-time, so this will mean a lot more people will need to be covered," she says.

Companies in industries that tend to employ greater numbers of full-time employees are expecting less of an impact: Only 31 percent of employers in service industries expect their healthcare costs to go up by 3 percent or more in 2014, according to the survey.

It's no accident that employers in the retail and hospitality industries are bracing for a PPACA-related hit in 2014, says Watts. That's when employers will be required to either extend healthcare coverage to all employees who work at least 30 hours a week or more, or else be subject to financial penalties.

Indeed, 46 percent of respondents from the retail and hospitality industries say they'll need to take action to avoid penalties by 2014, compared to only 16 percent of companies in the financial-services industry who said the same.

Companies with large contingents of low-paid, part-time employees that already offer healthcare coverage often find they have fewer takers than companies in other industries: The so-called "opt-out" rates at these companies average nearly 20 percent, according to the survey, whereas the rate among workers at transportation, utility and communication companies is only 8 percent.

"Workers at these companies tend to be full-time and better-paid than in retail and hospitality," says Watts.

HR leaders at many retail and hospitality companies are considering "workforce management" as a way to help them cope with projected cost increases, she says. This may include limiting the number of employees who work 30 hours or more per week to limit their cost exposure, she adds.

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Indeed, the survey found that 67 percent of retail employees that don't currently offer coverage to employees who work at least 30 hours per week plan to alter their strategy so fewer workers meet this threshold, compared to 41 percent of manufacturing companies planning to take this route.

Retail and hospitality employers will be "the canary in the coal mine" when it comes to assessing PPACA's impact on industries, says Neil Trautwein, vice president for employee benefits policy counsel at the National Retail Federation in Washington.

"If the federal government can accommodate PPACA to fit our industry, then it will fit most others," he says.

Given the size and variety of the retail industry, it's difficult to generalize how it will be affected by the healthcare law, says Trautwein. Nevertheless, he says, most employers in the retail and hospitality industries will encounter "sharp regulatory sticker shock" in 2014.

"This is a very complex law and will be tough to administer, especially considering the fact that it defines a full-timer as someone who works 30 hours a week," he says.

The NRF has added a section to its website,, that outlines what its members must do to comply with the healthcare law, says Trautwein.

The NRF has made no secret of its opposition to PPACA in the past, he says.

"I think the Obama administration understands that we don't like the law because we think it will have an adverse impact on our industry," says Trautwein. "But, as long as it's the law of the land, we will comply."  

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