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Editor's Note: The following is part one of a two part series by Jenny Agnew on how President Obama's Patient Protection and Affordable Care Act (better known as Obamacare) affects not only the workers in both independent and chain restaurants, but those who dine in those restaurants as well. Part two will be published in this space tomorrow.
That the Supreme Court’s recent decision to uphold the Patient Protection and Affordable Care Act has caused controversy is no surprise to most. What may have fallen under the radar for the general public, however, is how the decision will affect restaurant owners who employ over 50 full-time workers (with full-time defined as 30 hours or more a week). By 2014, according to the decision, business owners will be required to provide healthcare benefits to their full-time employees and dependents or risk paying penalties (a $2000 per employee annual fee).
The National Restaurant Association (NRA) has expressed “strong concern” with the act going back to 2010, when President Obama first introduced it. On June 29, one day after the ruling, the association hosted a webinar for members to learn more about how it will affect them. Another webinar is planned for July 19, and their website offers a number of resources for those in the industry. “One aspect of the bill the NRA supports requires chains of at least 20 units to post calorie counts for standard menu items,” writes Jordan Melnick for QSR. Although the dust has hardly settled after the decision, we spoke with several people in the local restaurant industry for their perspectives.
As a sign of the confusion and complexities surrounding the act (the document is reported to be over 2500 pages long), a couple of people we contacted weren’t ready to talk yet because they were either meeting with financial and insurance consultants (Mike Emerson of Pappy’s Smokehouse) or too busy with a new restaurant and hadn’t had time to take in the “bigger picture” (Andrew Ladlie of Sassy Jac’s). For more on the specific penalties restaurant owners may be facing, see this QSR article, which summarizes the NRA’s amicus brief for the Supreme Court hearing.
Prepared to talk was Chris LaRocca, who owns Crushed Red Urban Bake & Chop Shop and EdgeWild Restaurant and Winery. His regular Friday management meeting happened to take place on June 29, and they spoke of little else. Currently, LaRocca, like many restaurateurs, offers health insurance to salaried employees in management. Also like many in the business, he’s unsure of exactly how “all of this will roll out.” He does know that the decision has his ownership group “really concerned.” He continued, “I understand the underlying good of providing insurance for employees, but I’m not sure this is how to get there.”
LaRocca predicts three outcomes once the act is enforced: (1) prices will go up, (2) jobs or hours will be eliminated, and (3) overall growth, already compromised by the recent economic downturn, will slow even more. As in 2007, he said he’ll need to find “new ways to become productive and resourceful.” Grappling with the larger misperceptions about restaurant owners making great profits, LaRocca doubts that those outside the industry comprehend the slim margins on which restaurants run: “The public and Washington cannot understand what our business models look like.”
When we spoke with LaRocca, the 10-day stretch of 100-plus heat had just begun, so his immediate concern was with food prices, which will surely go up as a result of the heat and drought. Such concerns remind one of just how quickly margins can change for those in the industry and what limited control a restaurant owner has over his or her business. It’s understandable, then, why many perceive government mandates on health insurance to be one more area out of their control.
A newer restaurant owner, Mathew Unger from Mathew’s Kitchen, expressed similar concerns. Unlike LaRocca, he may not be initially affected by the decision since his restaurant staff remains on the smaller side. However, should he want to open another establishment—something he stressed he’s not yet ready to do—he would have to think twice before expanding. Unger also asserted that health insurance should be available to all but questions what the quality of insurance will be like once so many more people are required to be covered. “One key thing is that business owners as a whole are good for the economy, and we look out for employees the best we can. First, we want to keep people employed,” he said, concluding that some may be let go in order to offset insurance premiums.
While one way around compliance might be to cut employees’ hours, essentially turning them into part-time workers, Unger noted that this won’t work for those in management, who are “steering the ship.” He explained: “If you can’t have them to rely on, service is going to go down.” Unger echoed LaRocca by predicting that customers may have to bear the brunt of the decision: “If you look at the big picture, what you’re hoping doesn’t happen is that the cost is passed off to end consumers and they eat out less.” One potential bright spot, though, for Unger and perhaps other independent restaurant owners is that chain restaurants may not open as many locations.
Tomorrow in part two: Hear from several local multi-unit operators, as well as from one independent operator who provides health insurance for all his employees.
