Businesses Cutting Hours, Bracing for Costs of Obamacare

It seems that every day now brings another business owner in the news talking about cutting workers’ hours or making other cost-cutting moves in anticipation of Obamacare’s impact in 2013.

Here are just a few of the business owners’ comments on the health care law:

  • “We’ve calculated it will [cost] some millions of dollars across our system. So what does that say—that says we won’t build more restaurants. We won’t hire more people,” Zane Tankel, chairman and CEO of Apple-Metro, which runs 40 Applebee’s restaurants.
  •  “There’s no other way we can survive it, because we think it will cost us 50 cents a sandwich. That’s just the actual cost. If you have 40 or 50 employees at a restaurant, and the penalty is $2,000, and you’re going to pay $80,000 or $100,000 penalty, there goes the profit in your restaurant.”—Jimmy John Liautaud, founder of Jimmy John’s subs, who said he was considering cutting workers’ hours to come in under the Obamacare mandate threshold.
  • “It’s a great concept. We want to have everyone insured. The problem is, who is going to pay for it and how are we going to accomplish this?” — John Metz, who operates roughly 40 Denny’s locations and five Hurricane Grill & Wings franchises in Florida, Virginia, and Georgia, and has said he may have to add an Obamacare surcharge to his menus.
  • “New unit construction will cease if we have to allocate moneys for that construction to the [Affordable Care Act]. And building new restaurants is how we create jobs.” — Andy Puzder, CEO of CKE Restaurants, which owns Hardee’s and Carl’s Jr.

Heritage’s Alyene Senger explains that these businesses are responding to Obamacare’s employer mandate, which has a job-killing effect:

Obamacare requires all businesses with 50 or more full-time employees to provide health coverage for their workers or pay a $2,000 penalty for each employee after the first 30 workers. The employer mandate creates incentives for businesses to avoid higher costs by, for example, hiring part-time employees instead of full-time employees, since businesses will not be penalized for failing to provide health insurance to part-time employees….Businesses can also avoid penalties by keeping the number of employees under the mandate threshold of 50, which further discourages creating new jobs.

These businesses’ plans are only the effects based on what we know about Obamacare. There are still many, many crucial details that we don’t know. Health and Human Services (HHS) just released some of the new rules that will govern what kind of coverage insurers must offer —and Heritage’s experts are still going through the 300-plus pages of regulations to sort out what they mean.

In the meantime, forget President Obama’s “if you like your plan, you can keep it” promise. Two government agencies have estimated that more than 11 million people will no longer have their employer-sponsored health coverage once Obamacare is fully implemented. Other studies have put that number much higher.

With employers dumping employees into government-run insurance exchanges or Medicaid (which are still unsettled proposals), the future of health insurance will be taxpayers footing the bill. This is a huge money problem on top of the skyrocketing entitlement programs that already exist. But on a personal note, it’s not the best solution for the under-employed or under-insured.

Take Dave Willingham, a 32-year-old interviewed by Huffington Post after taking a job at a community college cafeteria in Washington State. “When he recently accepted his job after a bout of unemployment, he was told up front that he would not be getting more than 19 hours per week. That’s because workers who average 20 hours per week qualify for benefits like health care, vacation and sick pay, he said.”

In his cafeteria job, Willingham earns a little more than minimum wage and receives food stamps. But this isn’t the situation he wants for himself:

 “That subsidy is a huge blessing for me,” Willingham said. “But at the same time, I’d rather have the agency and dignity that would come with actually having more money coming in and getting to make that decision for myself….Ultimately, it would be nicer to feel more in control of my own life and destiny.”

Becoming dependent on the government for health care is not a step toward personal control or an improved life situation for workers like Dave Willingham. But sadly, that is exactly where Obamacare is taking hourly workers.

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