Companies React As Obamacare Moves Forward

With President Obama's reelection last week, it pretty much assures that his hotly contested Affordable Care Act (aka Obamacare) will move forward. And this appears to have a lot of businesses concerned about how they will pay for the additional coverage for their employees.

In a nutshell, Obamacare is due to be fully implemented in a little over a year (January 2014). Businesses with more than 50 employees will be required to offer an approved insurance plan to workers who work at least 30 hours per week. If the employer chooses not to offer the insurance, it will have to pay a $2000 penalty (per affected employee). This is what prompted several businesses to make some drastic changes over the past week.

For example, a Denny's franchise owner in Florida recently announced that he will begin adding a 5% surcharge to customer's bills. This is to help offset the inevitable costs he will have to absorb as a result of Obamacare. The same business owner also said that he will be reducing many employee's hours to under 30.

Papa John's also announced that the new healthcare plan will add 11-14 cents to the cost of each of the company's pizzas. This cost will be passed onto the consumer. I really don't think that the average person would complain too much about paying an extra 14 cents for a pizza. But there's also talk of cutting worker's hours. I must note that Papa John's recently gave away two million free pizzas in a NFL promotion. So, I can understand the criticism that would likely follow.

Darden Restaurants which owns popular chains like Olive Garden and Red Lobster has announced plans to cut hours as well. Darden's 185,000 employees are all currently offered health insurance. But that doesn't mean things are going to stay the same. Many of employees currently have plans don't have enough bells and whistles to fulfill the requirements of Obamacare. Therefore, Darden will have to beef up the insurance plans or be forced to pay the penalty. So, instead, the company will likely reduce many employee's hours to the magical under-30 mark. (On a side note, I have read that the CEO of Darden is a big-time Obama supporter/donor. So, I'm scratching my head a little on that one...)

Along the same lines, several medical equipment makers recently announced plans to cut their workforces. Obamacare includes a 2.3% industry-wide excise tax on medical equipment.

So, what does this all mean? Is this knee-jerk reaction by frustrated companies who had rolled the dice on a Romney presidency? Or is it simply a political statement? And how will customers react to all of this? I've already seen online chatter calling for the boycotts of some of these companies. For American businesses as a whole, could this only be the tip of the iceberg? Will the standard work week now be 30 hours or less?

Giving everyone affordable healthcare insurance sure sounds like a good thing. But someone has to pay for all of this. That's where the big problem lies....

And I know people are going to redirect things to some degree (i.e... It was Nixon who first introduced the mandate, universal healthcare was Newt Gingrich's idea, socialized medicine works so great in other countries, etc). What difference does it make? The bottom line is this is President Obama's baby. If the Affordable Care Act turns out to be a great thing, he will certainly take the due credit. However, if it proves to be an economic disaster, he's going to have a hard time trying to blame this one on Bush....

kw