Small business owners are feeling the crunch of Obamacare. They cannot afford to pay for health care for all of their employees nor the penalties tacked on if they fail to provide coverage. Companies will not be able to grow and expand for fear of these fees. They also may cut back staff or knock them down to part-time.
MediBid offers affordable health plans for employers. Business owners can set up HSAs so their workers can pay cash for medical care they might need. Doctors are willing to work with patients directly without insurance interference.
Small Firms’ Health-Law Pains
By LOUISE RADNOFSKY August 1, 2012
Randall Tabor, who owns two Quiznos sandwich restaurants in Virginia Beach, Va., once aspired to triple the number of outlets he owns.
But after the federal health-care overhaul passed in 2010, Mr. Tabor says, he shelved those plans. The law requires that employers with 50 or more full-time workers provide health insurance to employees by 2014 or pay a penalty. Mr. Tabor, who employs 36 people at his two Quiznos shops and another restaurant, wants to stay small so he doesn’t trigger the requirement.
Restaurants and retailers face some of the toughest changes now that the Supreme Court has kept the overhaul in place. These industries historically are among the least likely to provide insurance to workers.
Many franchisees of big chains hover around the threshold at which they will be required to start insuring workers or pay the penalty. With high turnover and a large percentage of part-time and seasonal workers, restaurant and retail operators must juggle several variables in figuring out whether they will cross the threshold.
McDonald’s Corp. Chief Financial Officer Peter Bensen told analysts last week that the law will add between $10,000 and $30,000 in added annual costs to each of the 14,000 McDonald’s restaurants in the U.S., 89% of which are franchisee-owned.
Burger King Worldwide Inc. expressed a similar concern. “Many of our franchisees will struggle with how to reconcile the financial implications…and will likely take other measures to reduce costs,” Steven Wiborg, president of the chain’s North American arm, said in a prepared statement.
The franchisees themselves are emerging as even more-vocal critics of the overhaul.
Operators of outlets including Subway, Burger King and Dunkin’ Brands Group Inc.’s Dunkin’ Donuts last week met with more than a dozen lawmakers in Washington to complain about the law. Industry trade groups are also pushing the White House to soften the requirements through regulations that will spell out exactly how employers must comply with the law, known as the Affordable Care Act.
“I don’t have the profit margin to pay for it,” says Mr. Tabor, who doesn’t offer health benefits to his Quiznos workers.
Some restaurant owners who offer limited health-benefit plans say they will drop them and pay penalties rather than provide the more expensive insurance required under the law. For employers above the threshold, the penalty starts at $2,000 a worker, although the first 30 employees don’t count toward the levy.
John Motta, who owns 10 Dunkin’ Donuts in New Hampshire and 10 in Virginia, said he offers workers a choice of two insurance plans and pays half the premiums. He is weighing whether to drop coverage but said the cost of the penalty could put him out of business in Virginia, where his stores are struggling.
Other franchisees are looking at ways to avoid the requirement by cutting workers’ schedules so they work fewer than 30 hours a week—the law’s definition of a part-time worker—since only full-time workers are counted toward the insurance coverage requirement.
A question for franchisees is whether the federal government will count their employees based on the combined number at all their outlets or treat each outlet as a separate business.
Obama administration officials say they have listened to the concerns of the restaurant and retail industry and that regulators might offer some flexibility on that issue.
Democrats who crafted the health-overhaul law say that employers offering coverage is essential to making the law work. The law’s sponsors say it helps businesses get reasonably priced insurance. Some employers can use new insurance exchanges created by the law to shop for coverage, while the smallest businesses will receive tax credits to offset the cost of covering lower-wage workers.
Entrepreneur Jody Hall says she welcomes the law. She left a marketing job at Starbucks Corp. and started a cupcake store in Seattle in 2003 that has six locations with 100 employees, 55 of whom are full-time. She says she has been providing insurance to employees since shortly after opening shop, and pays around 75% of their premiums.
The exchanges will give her the “same kind of access I had in corporate America at similar prices,” she says. The law “works if everybody’s involved,” says Ms. Hall, who has testified to Congress in support of the overhaul law.
Jason Furman, an economic adviser to the president, says states such as Massachusetts that imposed requirements for employers to provide coverage haven’t seen declines in employment as a result. “The vast bulk” of large businesses already offer insurance, he says. “We want them to continue to do that.”
Still, skeptics say they fear disruption in the insurance market. “We don’t know how to plan for it,” says Kathie Veasey, owner of a True Value hardware store in Wilmington, Del. She says she pays the full cost of insurance coverage for 10 of her 11 full-time employees. Her business won’t be subject to the insurance-coverage requirement because of her payroll’s size, but she says she doesn’t expect the law’s changes to bring down her premiums.