Sept. 13 (Bloomberg) -- Trader Joe’s Co., the closely held grocery store chain, will end health benefits for part-time workers next year, directing them instead to new insurance marketplaces as companies revamp medical coverage to fit the U.S. Affordable Care Act.
Employees with fewer than 30 hours a week will no longer be given health coverage as of Jan. 1, and will receive $500 to help them buy insurance elsewhere, the Monrovia, California- based company said in a statement.
The move makes Trader Joe’s the latest U.S. employer to cut benefits or reduce hours in response to the 2010 act, which requires companies to offer affordable coverage to full-time workers starting in 2014. Trader Joe’s, the owner of about 400 stores, said most of the affected employees will find a better deal on the health-law exchanges, where buyers may be eligible for federal subsidies.
“Depending on income earned outside of Trader Joe’s, we believe that with the $500 from Trader Joe’s and the tax credits available under the ACA, many crew members should be able to obtain health care coverage at very little, if any, net cost,” the company said yesterday in its statement.
The health-care law mandates that companies provide coverage for those who work more than 30 hours a week or pay a $2,000-per-person penalty. Some large U.S. employers have pulled back on health benefits citing the law’s expenses and new insurance options among their reasons.
United Parcel Service Inc. said last month it would end benefits for 15,000 employee spouses who can get health coverage through their own job. International Business Machines Corp. said last week it would end a company-sponsored health plan for 110,000 retirees. They’ll be sent to private exchanges that work similar to the new public marketplaces.
“This is a move to enhance Trader Joe’s bottom line and what’s unfortunate is they are using some of the loopholes in the Affordable Care Act,” said Tim Schlittner, a spokesman for the United Food & Commercial Workers International Union, which represents unionized grocery store employees.
The cutbacks are “a source of increasing frustration for us,” Schlittner said. Trader Joe’s workers aren’t unionized, he said.
Trader Joe’s said more than 77 percent of its employees would see no change to their medical coverage. For those who are affected, the company estimated more than 70 percent will pay less for comparable health insurance on the exchanges, according to the statement.
“We believe the new program will provide those who work at Trader Joe’s with affordable options,” the grocer said.
The company cited the example of an employee who worked 25 hours a week and now pays $166.50 per month for insurance through Trader Joe’s plan. On the exchange, she could find “comparable coverage” for $69.59 a month, the company said. That, combined with Trader Joe’s $500 contribution, would translate to a savings for the employee of $1,675 next year, the company said.
Some workers may end up paying more, Trader Joe’s said because tax credits on the exchange will be based on a buyer’s household income, which could be driven up if other family members are working.
Trader Joe’s may end up a rarity in dropping benefits, as it’s “relatively uncommon” for employers to offer coverage to part-timers in the first place, said Larry Levitt, a senior vice-president at the Kaiser Family Foundation. The Menlo Park, California-based nonprofit group studies health policy.
“I wouldn’t be at all surprised that low-wage, part-time workers would generally be better off with the tax credits in exchanges,” Levitt said in an e-mail. “These workers may be a young, healthy bunch who would help the risk pool. At least they seem to be at my local Trader Joe’s.”
The Affordable Care Act exchanges are due to open Oct. 1, to sell policies that take effect Jan. 1.
At Kroger Co., the largest U.S. supermarket chain, health coverage for employees who work fewer than 30 hours a week differs by market based on local union contracts, Keith Dailey, a spokesman, said in an e-mail. The Cincinnati-based grocer employs 343,000 people, of which about two-thirds are part of local collective bargaining agreements.
“Most of our labor contracts provide for health-care benefits of some kind for part-time workers,” he said.
Whole Foods Market Inc. has no plan to change its health benefits, said Kate Lowery, a spokeswoman for the Austin, Texas- based chain, in an e-mail. The company provides coverage for employees who work more than 20 hours a week, she said. Those who work fewer than 30 hours pay their own premiums.
At Safeway Inc., the Pleasanton, California-based grocery company, employees who work fewer than 30 hours a week get coverage, Brian Dowling, a spokesman, said in an e-mail. He didn’t respond to questions about whether the company plans any changes in its benefits.
Supervalu Inc., the owner of Save-A-Lot and Shoppers that’s based in Eden Prairie, Minnesota, provides part-time workers with health-care benefits, Jeff Swanson, a company spokesman, said in an interview. He declined say whether the company planned to change any health-care policies or plans.
--With assistance from Leslie Patton in Chicago and Alex Wayne in Washington. Editors: Andrew Pollack, Angela Zimm