Cumberland Gulf's Health Care Gambit

Commitment to expand coverage, convert part timers to full time will cost "several million dollars"

Ari Haseotes

FRAMINGHAM, Mass. -- Ahead of the official rollout of the controversial Patient Protection Affordable Care Act, often called "ObamaCare," The Cumberland Gulf Group--which includes Cumberland Farms, the 600-unit convenience store chain, and Gulf Oil, the branded marketer of gasoline and energy products--said that it will expand its health care program to include approximately 1,500 additional employees effective Oct. 1, 2013.

As reported in a Raymond James/CSP Daily News Flash on Tuesday, even though the new law does not go into effect until Jan. 1, 2014, the company has decided to implement its plan early, expanding the number of employees who will be eligible for health care benefits by moving a significant portion of its workforce from part-time to full-time status.

"We are a people-focused company, and we fundamentally believe that it is our serious commitment to our people that will continue to set us apart in the marketplace. Investing in our employees is not just a smart thing to do--it is the right thing to do," said Ari Haseotes, president and COO of Cumberland Farms. "Finding and retaining qualified, productive employees is mission-critical for us, so we are committed to making Cumberland Gulf the 'employer of choice' and treating our employees as partners. With this decision, we are confident that we will continue to accomplish great things together."

Earlier this year, senior management began to review options on how the company should address the new federal mandate. The law requires employers with 50 or more full-time employees to offer medical coverage to those employees while also redefining a full-time employee to one that works 30 hours per week or more. The Cumberland Gulf Group currently employs about 3,000 full time employees at 40 hours per week and 4,200 part-time employees. In order to aggressively pursue the extension of benefits to its part-time population, the company is reclassifying 1,500 part-time employees to full-time status, which will bring the mix of employees to approximately 4,500 full-time and 2,700 part-time.

Cumberland Farms plans to move the newly eligible employees to a work week of 32 hours or more, and these positions will now be considered full-time, according to a Wall Street Journal report. Employees who were working 30 or 31 hours per week will have the option of moving up to 32 hours, becoming eligible for the company healthcare plan, or moving to 29 hours or fewer, with no company-sponsored insurance. No employees will work in the 30 to 31 hour range after the changes go into effect on Oct. 1.

Under the act's "pay or play" scenario that businesses across the country are now evaluating, some retailers will choose either the path of paying the IRS imposed penalty of $2,000 for every full time employee rather than pay for medical insurance, or begin scheduling many of their employees to under 30 hours per week to avoid full time classification.

Cumberland Gulf said it is "is doing neither; instead it has chosen a path that best suits its culture of investing in its people."

The primary metric the company considered was its employee turnover ratio, said the report. Full-time employees stay, on average, three to four times longer than part-timers do, Haseotes told the Journal. Longer-tenured workers deliver a better experience for the customer, especially in the c-store business, where the customer is often in a hurry, he said.

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

Haseotes said he expects about 50% of all eligible employees to choose company-sponsored health insurance. Cumberland Gulf is adding to its offerings a high-deductible plan that meets the act's affordability and minimum coverage requirements. He said he expects the changes to cost the company "several million dollars."

Cumberland Farms has a market-leading position throughout the Northeast as well as a significant presence in the Mid-Atlantic region and Florida. Cumberland Farms is parent company to Gulf LP, one of the largest wholesalers of refined petroleum products in the Northeast and Mid-Atlantic. In 2012, the Cumberland Group generated approximately $15 billion of sales through a footprint of approximately 600 c-stores operated under the Cumberland Farms banner and through the operations of its subsidiary Gulf Oil. The Cumberland Group, Framingham, Mass., is a privately held, family-owned and managed company that includes real estate and midstream gasoline operations.