The ever-evolving Affordable Care Act continues to pose challenges for retailers, even as many c-store chains make employee healthcare a top priority.

By Erin Rigik, Senior Editor

With the Patient Protection and Affordable Care Act (ACA) here to stay for the foreseeable future, convenience stores are working overtime to meet the new guidelines and prepare for mandates—from the Cadillac tax in which Americans with the most expensive employer-provided plans will face a 40% tax in 2018—to extensive reporting requirements.

For some c-store companies, the transition has been less strenuous because of internal health programs already in play. Chains including Family Express Corp., Kwik Trip Inc. and QuikTrip Corp. have long made employee health benefits and long-term health wellness services a priority of their operation, giving them a leg up during the ACA transition.

But even for retailers going above and beyond, the transition has been complex and confusing, and it’s not over yet.

“It’s still a bit of a puzzle palace for retailers,” said Neil Trautwein, vice president of healthcare policy for the National Retail Federation (NRF). “The rules are complex. They play off of each other. I would say that most retailers have a difficult relationship with the Affordable Care Act.”

Even for savvy convenience retailers, learning the ins and outs of the healthcare law was arduous.

“The most challenging aspect was how confusing it was,” said Mike Thornbrugh, spokesperson for Tulsa, Okla.-based QuikTrip, which operates 723 locations in 11 states. “I say that lightly, but I don’t think anybody really understood just exactly what was in [the ACA],” Thornbrugh said. “For us, our philosophy was really simple. Like most companies, we’re committed to controlling the costs and providing the best quality and access of care for our QuikTrip employees and their families.”

EVOLVING LAW
While the U.S. Supreme Court ruling on subsidies made it clear that the ACA is here to stay, NRF is working on a myriad of proposals to help make it easier for retailers to comply with the ACA mandates. Such
proposals include fixes so the reporting mandates are “more of a prospective system than retrospective;” potentially changing the definition of a full-time work week, which currently stands at 30-hours per week; and altering the rules around the Cadillac tax, which is a 40% non-deductible excise tax on employer-sponsored health coverage.

As the initial deadline for implementing ACA requirements approached, many retailers railed against definition of a full-time worker and the requirement that they provide health coverage to full-time and full-time equivalent employees, saying it would lead to eliminating full-time staff and having only part-time employees.

Trautwein noted that “anecdotally and more by attrition than by action,” in some cases this has, in fact, occurred. “Positions get redefined,” he explained. “The 30-hour work week also has an effect on that.”

This year, an employer that employs at least 100 full-time employees or full-time equivalents (FTE) is subject to the Shared Responsibility Employer Mandate provisions of the ACA. Employers with 50 full-time or FTE employees have until 2016. The employer mandate generally imposes penalties on a “large” employer if the employer fails to offer affordable, minimum-value group health plan coverage to its “full-time employees,” generally defined under the ACA as employees working 30 hours or more per week.

“We’re also pursuing legislation to increase the applicable employer size to 100 full-time employees (from 50 in 2016). So there are a lot of things we think would make life easier for retailers and employees,” Trautwein said.

Of all the rules to come out of ACA, Trautwein noted the reporting requirements, which are similar to the current W-2 reporting system for taxes, pose the biggest challenge for retailers. The reporting requirements are part of the Employer Shared Responsibility Mandate, and require insurance carriers and employers to provide detailed data on health coverage to the IRS as well as related statements to full-time employees.

“The Feds have just come out with their forms. The states are all over the map. And it’s just a colossal mess for lack of a specific term,” said Trautwein. For example, a retailer might get a notice saying, ‘someone in your store may be receiving a subsidy,’ and not much more than that to identify the employee.

Nonetheless, in January 2016, retailers will need to report on their compliance for 2015. “It’s a bookkeeping nightmare somebody has to endure,” said Gus Olympidis, president, CEO and founder of Family Express, which operates more than 60 locations in Indiana, of the reporting requirement.

What’s more, Trautwein pointed out, the reporting requirements are running in advance of the government’s ability to handle the information they’ll be receiving.

“They’re just not very well suited to manage that,” Trautwein said.

Nonetheless, the reporting requirements are the linchpin tying together all provisions, including eligibility for subsidies among employees and penalties c-stores might face. Therefore, “it’s important to get this right,” Trautwein said. “It’s currently way too complicated for what it needs to be and we’re working with a bipartisan group of lawmakers on the Hill, trying to simplify this. It points to how even five years after enactment, the Affordable Care Act is an evolving law.”

As aforementioned, also coming is the Employer Shared Responsibility Mandate for 2016, where applicable large retailers with 50 or more full-time employees must provide health insurance to 95% of full-time or FTE employees (up from 70% in 2015 for retailers with 100 or more full-time employees). Trautwein noted that where this becomes challenging is when c-stores have employees with fluctuating work weeks, as well as part-time employees who might sometimes crest the 30-hour threshold.

While there is much about the law NRF would like to see fixed, the top three priorities include moving the definition of a full-time worker from 30-hours a week to 40, fixing the reporting requirements to be more manageable and altering the Cadillac tax on high-value health plans.

Other desired fixes include changing the size of the applicable large employer from 50 full-time employees to more than 100 and the issue of how and when seasonal employees should be counted—a legislative proposal that the NRF is involved in.

“I think really after five years and all the theater of Supreme Court cases and repeal votes, we’re finally getting
down to fixing what needs to be fixed in the law so it’s not too late,” Trautwein said.

But even as many retailers continue to protest and attempt to alter the ACA mandates, many are going above and beyond when it comes to employee wellness programs and good healthcare policies, which meets the spirit of what the ACA intended.

A STEP AHEAD
When the ACA was just gaining its regulatory legs, QuikTrip was already taking vigorous steps to implement proactive wellness programs, including company-sponsored employee clinics that provide free healthcare services.

Today, QuikTrip employees have access to an impressive 21 healthcare clinics that operate within the c-store company’s vast operational footprint.

“The goal was to provide as many as we possibly could. We wanted to spread them out across our network so it was easy for employees to get there,” said Thornbrugh.

The clinics provide more than 100 different generic prescriptions for free flu vaccinations for employees and families, and a range of preventative services. Wellness programs, such as for weight management, nutrition management and smoking cessation, are also available. “The goal is to save our employees money and save them time,” said Thornbrugh.

All full-time employees and their immediate families are eligible to receive care at the primary care facilities. Part-time employees, with one-year of service under their belts and an average of 30-hours a week are also able to use the clinics.

The company launched its first primary care facility at its corporate headquarters in Tulsa, Okla. in 2007, then its second in 2009. As the initiative grew, company employees were quick to use the services offered.

Not surprisingly, QuikTrip has in turn, benefited. “We’re seeing much better attendance from employees because they’re not sick,” Thornbrugh said.

By the time the ACA had passed, QuikTrip already had a plan in place to move in the direction of opening the care facilities.

“Because we’re self-administered and a self- funded plan, one thing we are doing that is going very well is contracting directly with the various hospital systems to negotiate contract agreements to provide care through their network for all our employees. It’s been a tremendous success both financially and for our employees,” Thornbrugh said.

Thornbrugh added that doing the best thing possible for employees is a top priority at QuikTrip.

“Our goal is to provide them the very best, give them every tool possible and make healthcare affordable. We have a very young workforce and to have these astronomical deductibles for health insurance is just not acceptable to us,” Thornbrugh said.

Even with all the mandates ahead, based on its progress with healthcare so far, QuikTrip expects to be in good shape for meeting them as they come down.

“Obviously I don’t know what Congress is going to do, but I think the general path and direction that we already are on has proven to be very successful,” We’ve seen more and more employees take advantage of health services and getting preventive care for their families. If that magic formula continues to work for us, I think the future of QuikTrip and our offering of healthcare is going to be very, very successful.”

BUSINESS AS USUAL
Valparaiso, Ind.-based Family Express is another c-store chain that found the transition to ACA compliance relatively painless because it has made providing employees with quality health insurance a priority from the beginning.

“The transition has been relatively inconsequential for us because of the level of health coverage Family Express has historically provided to all of our employees,” said Olympidis. “We’ve always been on a Cadillac plan anyway. Our coverage was already available to everyone in our company. So the transition has been relatively inconsequential with the exception of the extraordinary imposition for record keeping that is enormous.”

Family Express’ employees are all full-time workers.

“The people that we hire we consider to be professional. They’re career oriented. Just a couple of weeks ago I handed a 20-year pin to a Family Express sales associate to give you an idea of the way we go to market,” Olympidis said.

Delivering quality healthcare to those dedicated long-term, full-time employees has always been a priority at Family Express.

“It has to do with the caliber of the person that we’re interested in attracting to Family Express and the necessity of our business model to somehow deliver the act of building relationships over the counter,” Olympidis said. “It is very difficult to do that with individuals that are not committed to the company long-term. So (providing health insurance) is not a new issue for us. We’re reluctant to call it even a new problem because it’s not a problem, it’s a competitive advantage.”

Family Express provides a full-service health club and fitness center to its employees, located at its company headquarters, complete with personal trainers. The retailer also provides an alternative subsidy for workers to attend a wellness center closer to home or offers reimbursement for a health club membership. If employees are looking to quit smoking, cessation assistance is available through the fitness center.

“Long-term, we would like to even entertain building a health clinic,” Olympidis said.

“We have been challenged by geography in delivering that service. An organization our size has a hard time centralizing a facility that would be practical for everyone.”

Part of Family Express’s health clinic model would be a means to connect with health clinics that exist in other locations in order to provide the service to all of its employees.

“That has held us a little back but we are giving consideration to the structuring of a health clinic. We continue to monitor this. We think it’s something that’s going to be happening sometime in the future,” Olympidis said.

FLEXIBLE CARE
La Crosse, Wis.-based Kwik Trip, which operates 450 stores, in Wisconsin, Minnesota and Iowa, opened its Kwik Trip Center for Health in December 2013 at its headquarters in La Crosse. When the center opened it served 3,000 Kwik Trip employees as well as their families, and provided online services for them as well as for 8,000 other workers. Over the past two years, the Center for Health has grown significantly.

“When we opened in December 2013, we started kind of small because this is something that was new for us so we offered basic services,” said Mila Spencer, benefits manager for Kwik Trip. “Today, we serve about 4,200 co-workers and dependents.”

Kwik Trip’s clinic first offered basic services like acute care, preventative care services and wellness services. Today, the company center, which is operated by local provider Marathon Health, has added physical therapy.

The clinic’s hours are staggered throughout the week to accommodate various shift schedules. The clinic is also open Sundays. Wellness programs are available, such as for weight loss and tobacco cessation, as well as activity challenges to get people moving.

“We’ve partnered with both of the local health systems, Gundersen and Mayo, to provide skin cancer screenings and mobile mammography, because those are services we don’t currently have at the health center but we would like to offer our co-workers. So we continue to partner with the local providers, nutritional programs and anything we can add on,” Spencer said.

The program continues to be a work in progress. As employees continue to access the services, and as it becomes apparent what additional programs or health services might be most useful, there is room to potentially add those programs moving forward.

Communication has been key in encouraging employees to use the services and to learn what additional services might be needed. Employees are able to provide feedback at any time about any of the services offered. The feedback thus far has been “phenomenal,” according to Spencer.

“They’re thankful to the company that they’re able to use the health center at a reduced cost or in some cases no cost and they come back with so many stories about how it changed their lives,” Spencer said.

Kwik Trip is looking at the feasibility of other health clinics in geographic areas. “When we began, this was new to us and we didn’t want to get in over our head. We wanted to focus on building the LaCrosse-based Center for Health and then see how far we could stretch our services,” Spencer said. “We wanted to see how well the remote online care could assist our coworkers outside this area.”

Kwik Trip continues to monitor progress and do research as the company expands into new areas to ensure it has enough employees to really accommodate another facility, she noted.

Being able to be flexible in adapting to what employees need and want most, while staying on top of anything new that may be available, has been paramount to the health center’s success.

“I think you have to be flexible in this type of situation because we don’t know everything about healthcare. We’re a convenience store chain,” Spencer said.

MAKING THE TRANSITION
Even for chains with extensive health services offerings, the transition to ACA compliance hasn’t exactly been a cakewalk.

“Nothing about the transition really has been easy because it’s a difficult law and I think there are things that are still yet to be determined. Each year presents new challenges,” said Spencer who has been in the trenches working on ACA compliance for the last five years.

“I became the benefit manager physically in the fall of 2010, which is when all of this started,” Spencer said. “It’s been pretty difficult because the focus becomes compliance and less about what we want to offer and the things that are really going to be helpful to our co-workers. It requires a lot of attention.”

Even with its extensive health plan, Kwik Trip found that many shifts in coverage were required in order to achieve compliance. For example, the chain has a significant part-time workforce, which has long had a different health coverage plan than for full-time employees.

“We had to look at those plans and determine who in that group is now going to be offered the new plan,” Spencer said.

Now that many c-stores have adapted their health benefit plans to fit the ACA rules, reporting on their coverage is the next hurdle. NRF’s Trautwein pointed out the reporting requirement that takes effect this January marks one of the biggest obstacles that retailers will need to overcome.

“It is a monumental imposition and it’s a hindrance to providing healthcare because you have to invest resources to handle mountains of regulatory paperwork,” said Family Express’ Olympidis of the reporting requirement.

Kwik Trip had to make significant technology changes to make sure it is properly tracking and reporting on ACA requirements.

“We’re in the middle of that right now,” Spencer said. “We’re implementing a new technology system to help track hours so we know exactly to whom we need to offer coverage and to whom we owe penalties and all of that just requires a lot of attention to compliance, which was something very different for us.”

Ensuring employees are informed of the latest regulatory changes is a constant process, and a challenge for most c-stores.

“I’ve spent the last five years really communicating everything that we’re doing and everything that is coming to make sure it’s very transparent to our co-workers,” Spencer said. “It’s important that they understand this law too, because it’s impacting a lot of the things that we’re doing. We also want to make sure they understand that we’re available to answer questions and knowledgeable enough about the laws to provide them information.”

The Cadillac tax that will apply in 2018 is another looming rule that retailers can’t afford to ignore. “It impacts our population significantly. With the Affordable Care Act you have to be flexible in your plans because things change, and they have changed, and that’s certainly a piece that we would like to change,” Spencer said.

But even though it’s 2015, and Kwik Trip hopes the law might change, it’s already looking at 2018 when the Cadillac tax is implemented and planning for that transition.

Meanwhile, the employer mandate, to provide coverage to 95% of employees who are full-time or full-time equivalent, is something for which Kwik Trip has already been preparing for some time. “Depending on when a plan starts and ends, there are different transitional rules under the law. We are where we have to be currently, and so we’re already looking at next year,” Spencer said.