Using Affordable Care to Cut Employee Turnover and Build Customer Satisfaction

The debate over health care in the US is often about anything but health. Ideology, morality, cost, the role of government, the burden on business, even national security. But health? Yeah, whatever. 

Interestingly, however, companies are finding a link between health care, employee turnover, management performance and customer satisfaction. In other words, at the nexus of influences on success. Where business lives.

The issue is that with an improving economy, employees have more options - and are looking for them. Employee turnover affects business performance by reducing 'tacit knowledge,' the experience with systems and what works - the ability to know how to get things done efficiently. Reduced tacit knowledge hurts customer satisfaction by making it harder for customers to get responses to their questions or to get the right answer at all. Since established customers are more profitable for any business than new customers, losing them hurts margins. In addition, the cost of replacing current employees with new ones is far more expensive than most companies imagine. While this is now well known within HR ranks, it is not always taken on faith at the top, where the employee as insignificant variable cost remains an article of faith.

The implication is that in an environment where competition for talent is becoming fiercer, affordable care may provide a crucial advantage for companies who evaluate it within the context of a broader set of performance indicators that accurately reflect all of the costs, investments and benefits. JL

Lauren Weber reports in the Wall Street Journal:

Full-time employees stay, on average, three to four times longer than part-timers do.

As a key deadline for the Affordable Care Act approaches in January, plenty of employers are cutting employees' hours to skirt regulations that require them to provide health insurance for all workers who log at least 30 hours a week, or pay a penalty.

But not every company is going that route. The Cumberland Gulf Group is expected to announce on Tuesday that it will maintain or expand some workers' schedules to make them eligible for company-sponsored care.

The increased costs for care will pay off in the long run, with better employee retention and customer service, a company executive said.

At Cumberland, which is based in Framingham, Mass., and owns the Cumberland Farms convenience stores and the Gulf Oil brand, an additional 1,500 workers will be reclassified as full-time and become eligible for company-sponsored health insurance in advance of the ACA deadline.

These workers were already working more than 30 hours per week, but not the 40 hours previously required for access to the company insurance plan.

"We sketched out all the options, which included paying the penalty or having employees work fewer than 30 hours," said Ari Haseotes, Cumberland Farms' president and chief operating officer.

The company has decided to make employee satisfaction and retention a corporate priority, and that meant expanding access to benefits.

"We've been moving in this direction, but the ACA galvanized us to move more quickly," he said. The changes will cost the company "several million dollars," he said, but declined to provide specifics.

Cumberland, which is privately owned, plans to move the newly eligible employees to a workweek of 32 hours or more, and these positions will now be considered full-time.

Employees who were working 30 or 31 hours per week will have the option of moving up to 32 hours, and therefore becoming eligible for the company health-care plan, or moving to 29 hours or fewer, with no company-sponsored insurance.

Starting Oct. 1, Cumberland expects to have 4,500 full-time employees and 2,700 part-time employees. For the part-time employees, Cumberland said it would develop communication tools to help them access insurance through state or federal exchanges being created to serve individuals and small businesses.

The primary metric the company considered was its employee turnover ratio.

Longer-tenured workers deliver a better experience for the customer—especially in the convenience-store business, where the customer is often in a hurry, he added.

"Our people know how to speed a customer through checkout quickly, how to use our ovens to make a pizza or sandwich right." When turnover is high, he said, customer satisfaction suffers.

Some employers are starting to look at ACA implementation in this broader way, said Dave Marini, vice president and managing director of strategic advisory services at Automatic Data Processing Inc., ADP -0.98%the payroll-services and employee-benefits-administration firm.

Mr. Haseotes said he expects about 50% of all eligible employees to choose company-sponsored health insurance.

Cumberland is still negotiating rates for its insurance plans, but it said the high-deductible policy will probably cost about 25% less than the plan that full-time employees currently use.

The company expects to cover about 70% of the premiums.