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    CSNews Exclusive: Retailers Sort Health Care Reform Impact, Options

    Caution, confusion, concern primary reactions.

    NEW YORK -- For the first part of the series, click here.

    When it comes to the new health care reform law, perhaps Tom Robinson of Robinson Oil Corp., operator of Rotten Robbie convenience stores, sums it up best: "I think I'm starting to understand it, but clarity is a ways off."

    Like other retailers contacted by CSNews Online, the San Jose, Calif. -based Robinson, who also heads NACS' Legislative Affairs Committee, believes the new law, which accomplishes its goal of providing health care insurance to millions of previously uninsured Americans, will be less successful meeting its second goal of lowering health care costs.

    "The additional costs will be paid by the business, the taxpayer, the employee or the consumer," he said.

    In some respects, he said the convenience store industry is in a better position than other industries, especially those who compete globally. "As my costs go up, my competitors' costs go up," he said. "We are not competing with China or Mexico or Canada; we're competing with the guy across the street. Usually, in this situation, the consumer pays."

    With penalties for not complying with the new law enforced in 2014, retailers have some time to better understand what the law means to them. (For details on the new law's requirements, see "Industry Concern, Confusion Surfaces In Wake Of Health Care Reform,".)

    Robinson, an operator of 34 stores who provides health care insurance for all of his full-time employees, is uncertain about advantages he may have under the law for sticking with his plan as it is grandfathered in -- and whether or not his plan will be grandfathered if he makes significant changes to it, which he predicts he'll have to do to be compliant.

    "While we pay for the individual, we offer insurance for a spouse or family, but the employee must pay for that," he said. "I don't believe that type of plan will be compliant."

    Still, with time to study the law and gather information from insurance brokers, companies and industry associations such as NACS, the retailer is confident operators will "go through the process of confusion, questions, some understanding, more confusion and more questions, until we understand the law well enough to determine wither to comply or pay the penalties.

    "The key is we can't blame our employees for this and take it out on them. So, while we do have to take health care into consideration in our total compensation plan, we can't punish them."

    Jim Tudor, president of the Georgia Association of Convenience Stores, based in Dallas, Ga., has been involved with state-level health care legislation since January and has kept in touch with all of Georgia's U.S. senators and representatives.

    "This has been a wait-and-see situation as retailers receive more information about the actual regulations," he said, noting he has received one member inquiry so far. "My sense is retailers are still digesting what really happened. Georgia is an extremely competitive market and any proposal that adds cost to our industry cannot be construed as good. Whether it will help or hurt recruitment remains to be seen, but my sense is the majority of our members, who would be exempt based on the number of their employees, compete in the same gene pool with other companies that are in the 50-plus category and would offer the mandated benefits."

    Anticipating new costs, Robinson and others are curious about how the law may alter the way some retailers go to business -- perhaps moving some company-operated stores to a dealer-operated or franchise model.

    At Douglass Distributing Co., in Sherman, Texas, corporate office staff, drivers, service department employees and store managers all have health benefits. "These new provisions will bring in added costs, since the insurance companies will have to provide coverage regardless of preexisting conditions and make it totally transferable," said founder Bill Douglass, who also serves on NACS' Legislative Affairs Committee. "The premiums have to go up."

    Today, store staffers are offered paid vacation, a $50,000 life insurance benefit and a limited medical plan. "These employees will cost us more, since we will be required to give them a program similar to the executives," Douglass predicted.
    The c-store operator and petroleum wholesaler believes many operators will convert below-average performing stores to dealer locations. "Unless you are a sophisticated marketer, such as Sheetz or Cumberland Farms, the c-store business can be a marginal operational activity," he said. "The incentive for many in the past to operate stores was in the ownership of real estate, since these stores could help build equity on the balance sheet. Multi-store marketers may see health care costs challenging their lower-quartile store economics and they'll likely spin those marginal stores off to single store operators."

    While Robinson said he foresees some operators converting stores, he plans to stick with his company-operated business strategy and work to turn the new law's requirements into a winning strategy. "If I compete against a smaller operator who decides not to offer health benefits and can be more competitive than us, that could be a problem," he said. "But we are paying for benefits now and the reality is if we put together a good wage and benefit program for people, we can attract and keep the good ones. To the extent we can provide a good plan and others don't, it may be a competitive advantage."

    Valero Energy Corp., which did not take a public stance on the legislation, hasn't done a detailed analysis of how the law will affect the oil company's benefits offering, according to spokesperson Bill Day. But Valero was one of several companies who reported it would take a charge to earnings in the first quarter 2010 due to the way the law affected tax incentives to provide prescription benefits to retirees. That charge is expected to be between $15 million to $20 million.

    On the other end of the size sale, one-store operator Bruce Butler of Bridgeport Ave. Shell in Shelton, Conn., with six employees, is exempt from the law's requirements. Although Butler's employees receive no health benefits, they earn $1 to $3 more per hour than their counterparts at chain stores. "I can't afford to have it both ways," he said. "Unless someone is working for a very large chain, he ultimately ends up paying for the benefits" because their wages are lower.

    When one of his long-time employees needed coverage, however, Butler did the legwork for her, asking his own health care provider and an insurance broker for options. "I made sure she got the best possible plan that she could afford," he said. "That's the best I could offer."

    The retailer said he'd look into the new law's tax credits for providing health care. "If it makes sense, I have no reason not to participate," he said. "I would love to be able to offer health care. I am on an individual health care plan for my own coverage, and the cost is outrageous."

    Douglass and others worry most about midsized chains. "They don't have the economy of scale of the big stores and the economy of scale of the single-store operator," Douglass said. "They will carry the burden of the increase."

    Like some others, Robinson is not "100 percent critical of the law," he said. "It's very difficult to create legislation for something like this. There are a number of things in this law that could lead to better health care and be positive for the individual and costs of the system," such as moving people out of the emergency rooms, or going to doctors for preventive care, he said.

    "Our choice is either we can complain about it or try to deal with it. Operating in a state such as California with a lot of onerous regulation, we always complain some, but then try to move on," he said.

    Related News:

    CSNews Exclusive: Concern, Confusion Surfaces in Wake of Health Care Reform

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