Photo:"Before the Affordable Care Act, we didn't have a reason to designate employees as full time or part time," says CEO Don Fox. "It didn't mean anything."
Special Report: Health Care Insurance
Insurance overhaul impact on a midsized employer: Firehouse Subs
Before deciding how to implement the Affordable Care Act — whether to extend health care coverage to hourly full-time workers, for instance, or just pay a penalty — Firehouse Subs CEO Don Fox wanted to know what the employees thought. So the Jacksonville-based sandwich chain held meetings with its employees. “They all said the most important thing is optimizing their earning potential,” Fox says, with a close second being consistent work hours.
Health care coverage wasn’t as important, he says.
He realized that the Affordable Care Act would provide an opportunity to restructure, rewarding good employees with full-time status, more work hours and a consistent work schedule — and health care insurance. He plans to implement these changes next year, a year before the penalties kick in for employers who don’t offer health care insurance to full-time workers.
Because Fox runs the Firehouse Subs headquarters and 29 of the chain’s 639 restaurants, he is a large employer under the law — so are 17 of his franchise owners. That means they are required to offer affordable, comprehensive health care coverage to employees who work more than 30 hours a week, or they have to pay a penalty.
Fox says before the law, Firehouse restaurants typically only had one salaried employee who was offered health care coverage. The rest of the workers were hourly and not offered health care.
“Before the Affordable Care Act, we didn’t have a reason to designate employees as full time or part time,” Fox says. “It didn’t mean anything.”
Now, he plans to divide the staff based on full-time and part-time workers. On average, most Firehouse restaurants have three employees who work more than 30 hours a week. They will now be classified as full time and have a schedule that never changes week to week. They will also be offered health insurance. Part-timers will have flexible schedules and won’t be allowed to work an average of more than 30 hours a week over the course of a year.
“We aren’t going to be cutting back on our full-time employees,” Fox says. “We value them. They are full time for a reason. They are good at what they do and are dependable.” But he says the company plans to be transparent with employees about who is getting full-time status and base it on merit.
By extending health care coverage to approximately three employees per restaurant, his health care costs will rise considerably. Fox says he now pays 100% of the health care premiums for his workers. He estimates health care premiums next year of about $4,000 to $5,000 per worker. “The big unknown is how many will accept insurance,” he says.
To cope with rising costs, he may have to ask employees to pay a portion of their health care premiums. “We are in all likelihood not going to be able to continue that benefit as it is.”
Fox is sure that he doesn’t want to pay the penalty for not offering health care insurance, even if it is cheaper. “If I am going to spend money on anything, it will be under the premise that I am getting a return on my investment,” Fox says. “I really can’t stomach the thought of spending tens of thousands, maybe hundreds of thousands, on penalties and having absolutely nothing to show for it.” Plus, he believes workers will value their health care benefit — even if it doesn’t rank high on their priority list.