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The Affordable Care Act is law: Now what?

Obamacare has taken effect, but many institutions and contractors are still evaluating its impact.

Mirlene and Nixon, two employees in the dining services department at the University of Maryland, in College Park, are among some 350 university employees who don’t have health insurance. For the past 10 years, the university has offered its part-time and seasonal employees—most of whom work in dining services or housekeeping—the Healthy Workers Program. The initiative provides employees like Mirlene and Nixon (who wished to be identified by first names only) free access to physicals and routine medical tests at the Campus Health Center. Ryan Winkler Cover Story

The costs of these procedures is covered by whichever department the employee reports to, and the Health Center also works with employees with medical conditions to find specialists and surgeons to treat them at little or no charge.

Sister Maureen Schrimpe, quality coordinator for dining services, who oversees the program for the department, says the program makes good business sense; keeping employees healthy allows the department to run more smoothly while keeping customers and fellow employees safe.

But the future of Healthy Workers is grim, thanks to the implementation of the Affordable Care Act (ACA), legally known as the Patient Protection and Affordable Care Act and more informally called Obamacare. Joe Mullineaux, senior associate director of dining services, says it likely will disappear. “If everyone is required to have health insurance, how could the university operate a program for people who don’t have insurance?” Mullineaux asks.

Healthy Workers’ shutdown would definitely have an impact on Mirlene and Nixon, even though they would qualify for healthcare benefits under the university plan, which offers co-paid insurance to any employee who has worked for it for at least three years. Both believe in the value of healthcare reform: “It gives people the opportunity to see a doctor,” Nixon says, and both say they plan on buying health insurance—but not yet. “I do not have it now because I do not have enough money,” Mirlene admits.

That is one potential side effect of the ACA. All Americans are now required to obtain health insurance, either through their employer or on the open market, or face a fine. And as employers like the University of Maryland examine their responsibilities under the employer mandate, through which employers with 50 or more full-time employees must provide health benefits to all FTEs or pay a fee known as the Employer Shared Responsibility Payment, they find themselves struggling to balance economics with the desire to take care of their most valuable asset: their people.

Industrywide impact

But one fact is undeniable, according to Michelle Neblett, director of labor and workforce policy for the National Restaurant Association (NRA): The ACA is going to have long-term implications for the foodservice industry.

“The greatest impact of the employer mandate is in the definition of full-time employee,” Neblett says. “That has the potential to have a huge impact on how our workforce looks in the future.”

For ACA purposes, a full-time employee is being defined as someone who works an average of 30 hours per week, based on a set measurement period. The traditional definition has been someone who works 35 to 40 hours per week.

On the restaurant side, Neblett added, that change could mean the hiring of many more part-time workers, as opposed to full time, and reducing their hours. It also could spell the end of the practice of part-time employees making extra money by pulling extra hours.

Cheryl McCann, director of human resources for Metz Culinary Group, the Dallas, Pa.-based food management firm that services schools, colleges and hospitals in the Northeast and Mid-Atlantic region, says the employer mandate “is going to have a huge effect on our business going forward.”

McCann adds that the company does not plan to make any changes to employee hours or classification. “As far as the employer mandate [goes], it hasn’t changed our numbers yet. But it is going to add lives to our plan.”

Ryan Winkler, a grill cook at Lebanon Valley College, in Annville, Pa., is one Metz employee for whom ACA has had an impact.

“I didn’t have insurance before, but with ACA I knew I had to get it, so I signed up for it this year through our company,” Winkler says. “I had heard from friends that the marketplace cost more and I thought our company’s prices were affordable for my budget.”

Winkler is a supporter of healthcare reform and he has seen secondhand the benefits of having insurance.

“My father recently passed away and the medical bills were over $200,000. Through insurance, we only had to pay $2,000.” But he admits, “I worry about homeless people and those who cannot afford it.”

Although Metz expects to be providing insurance for more employees because of ACA, the situation may be quite different at Sodexo, the Gaithersburg, Md.-based food management firm. Sodexo’s approach has been to redefine its definition of a full-time employee to be someone who works an average of 30 hours per week during a 52-week period. Previously, 30 hours per week for six or more weeks each quarter qualified an employee for full-time status.

Sodexo officials declined to be interviewed for this story, but according to a media sheet provided by Greg Yost, senior manager of media relations, “Sodexo is [making the change] to avoid potential penalties that could be levied. We made this decision to ensure compliance with the requirements of the Affordable Care Act and to maintain our competitiveness in the market.”

But the tactic has brought it under fire at several universities, including the University of Vermont (UVM), in Burlington, Texas Christian University, in Fort Worth, and Keene State College, in New Hampshire. Employees have argued that the move was being made solely to save the company money by eliminating benefits for thousands of workers.

However, at least one agency has validated Sodexo’s decision. Last September, the Vermont Department of Labor examined complaints coming from Sodexo workers about the reclassification. It ruled that “given the facts as we understand them, this change in scheduled work hours … does not appear to violate either the law or a contract.”

Despite the ruling, however, last October UVM administrators asked Sodexo to delay any changes in employees’ status until they could study the potential effects on employees’ healthcare benefits. A university spokesperson said that, as of early March, that hold was still in effect.

Unite Here, the union that represents tens of thousands of foodservice workers across the country—including some who work at Sodexo accounts—also is critical of the contractor’s actions.

“By choosing to reclassify its employees, Sodexo has cut a whole range of benefits—such as sick leave, paid vacation, and access to its health plan—from thousands of its full-time workers, in the process advising them to go onto Medicaid or the subsidized exchanges,” said Unite Here spokesman Brooks Bitterman in a statement.

“Even worse,” Bitterman continued, “Sodexo has publicly blamed the ACA regulations for this change, but none of its major competitors have done it, and Sodexo didn’t have to do it either. How can Sodexo do this to its own employees while claiming to be all about quality of life?”

Sodexo’s move is indicative of what some unions fear may happen as a result of provisions of the ACA, according to another union representative.

“We supported the Affordable Care Act and we believe it is a good thing for our members,” says the representative, who spoke on condition of anonymity. “But there are significant problems with what really is a well-intentioned law.”

For example, he says, multiemployer health plans could disappear under the ACA. Multiemployer plans are plans that are co-sponsored by employers and unions and are often used by small companies as a way to provide insurance to union employees they otherwise could not afford.

“These plans are very competitive and offer comprehensive coverage at below market cost,” he explains.

Under the provisions of the ACA, companies with fewer than 50 employees could opt to eliminate insurance without penalty, and firms with more than 50 employees could reduce hours of some workers to below 30 hours a week to get under the dictates of the mandate.

“Without regulatory relief, the law could have a huge impact on workers’ hours and, more important, bargaining power going forward.”

A mixed bag

For institutions that manage their own foodservice, how much the landscape is going to change as a result of the employer mandate really depends on a variety of factors and will vary from institution to institution. In some cases, operators are still trying to figure out what to do. In other instances, they have put a plan into motion and have a general idea of the potential impact. And in rare cases, mostly within the healthcare field, operators are making no changes because they already exceed the requirements of the ACA.

Among the non-commercial markets, colleges appear to be the ones most affected by the employer mandate, because they tend to hire the most part-time employees who come close to the 30-hour-a-week threshold.

One Northeast university is playing it close to the vest while it sorts out the provisions of the law, according to the director, who asked not to be identified.

“The whole impact of the Affordable Care Act is being assessed,” the director says. “We need to see what are our options and make the smartest move for our department and for our employees.”

She added that she has decided not to discuss the issue with managers until a decision has been made so that they don’t jump to premature conclusions. But she believes “this will change the way some of us do business; not just colleges and universities but throughout the restaurant industry.”

At the University of Maryland, Mullineaux says his department needs more information from the university’s human resources department before it will know how to proceed.

“We are waiting on the university to provide us with more guidance on which of our seasonal staff might be covered and also what insurance options the state will be offering to less than full-time staff,” Mullineaux says. “Most of our seasonal staff—about 500 employees—work only during the academic semester and during that time work between 25 and 35 hours per week. Based on some educated assumptions we have been running numbers to see what the net effect would be and have budgeted a little over $500,000 [for health insurance].”

Michigan State University (MSU), in East Lansing, is another school that is still assessing its options.

“MSU is reviewing employees who are not currently benefits eligible and estimating how many of them might become eligible under the ACA,” says Vennie Gore, associate vice president, housing and food services. “Our HR department is in the process of planning how the additional costs attributed to newly covered employees will be funded.”

Gore notes that a Consumer Driven Health Plan has been created for employees who would become eligible under the ACA. He expects that the additional costs will be borne by the departments that employ these workers.

“Each of our departments will review their temporary employee practices under the ACA in light of their budget and staffing needs, just as they do for their regular employees,” he explains. “I don’t expect that we will have fewer staff.”

Ahead of the game

Some universities have gotten out in front of the ACA definition by establishing their own, stricter rules. For example, the University of Illinois, in Champaign, has implemented a policy that limits hours for “extra help” employees to 25 per week, and for student employees to 20. Illinois defines extra help workers as “non-benefit eligible employees who typically do not have a set schedule.”

At the University of Missouri, in Columbia, staff considered part time who might have been scheduled for 40 hours a week on a temporary basis are now being capped at 28 hours a week. In both university’s cases, this has resulted in the hiring of more part-time workers.

“We implemented this change in August of 2013, so we have more temporary staff members now than we had at this time last year,” says Julaine Kiehn, Missouri’s director of university dining. “We [also] are tracking the number of hours worked by part-time/temporary staff members to determine who will qualify for coverage next year.”

At Illinois, Associate Director of Housing for Dining Services Dawn Aubrey says the university’s change has meant a 10% increase in the number of student and extra help employees.

“For example, students who could work 40 hours per week during break periods are now capped at 20 hours per week, meaning we need two students instead of one [for the 40-hour period],” Aubrey says.

At the University of Massachusetts, in Amherst, Director of Auxiliary Services Ken Toong says his department is prepared to offer health insurance to every employee who qualifies under the ACA, even though he estimates it will cost auxiliary enterprises about $2 million.

“I think of it as a part of the cost of doing business,” Toong says. “In order for us to keep good employees, providing basic healthcare is not a bad idea. We will continue to look for efficient and effective ways to provide services to our customers. We are looking at controlling costs by reducing food waste, sourcing wisely and increasing our energy savings.”

Some institutions either have been or are planning to be more generous than the new law requires. For example, at the Wexner Medical Center at Ohio State University, “All permanent employees with greater than a 50% appointment—20 hours per week—are eligible to purchase our health insurance,” says Julie Jones, director of nutrition services at Wexner.

Iowa State University, in Ames, “already provides health benefits for employees working 20 or more hours per week for nine months or longer,” according to Director of Dining Services Nancy Keller, who adds that as a result, “the impact of the ACA will be minimal.”

A moving target

As if the complexity of the ACA weren’t enough, adding to the headache is the fact that rules keep changing. For example, implementation of several elements have been pushed back, such as the date by which Americans were supposed to have secured insurance without penalty—originally Feb. 15, 2014, then moved to March 31—and the aforementioned shift in the employer mandate.

And it appears Congress isn’t through tinkering. Both the House and the Senate are considering bills that would redefine full-time status as 40 hours per week.

Once that is settled and the employer mandate takes effect, that will not be the end of the headaches for employers.

“The employer reporting requirements are about to come down,” the NRA’s Neblett explains. “Employers will have to begin reporting [insurance information] to employees and the IRS. There is the potential for a huge cost in the effort to become compliant. Currently, payroll systems do not track this mass of data, and there are very few off-the-shelf programs out there.”

On top of that, as far as hospitals are concerned, is the issue of determining the reimbursement to hospitals and long-term care facilities under the provision of the act.

“I think there is still a lot of uncertainty surrounding payment to healthcare organizations, so many in healthcare are working hard to control their expenses,” Jones says. She explains that the number of employees an institution has will be determined by the reimbursement levels they receive.

“I think most people believe that we will need to be more efficient with our labor and expenses to meet the impact of ACA. There will be renewed emphasis though controlling healthcare expenses for the employees we do have, with a much stronger focus on wellness.”

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