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How Obamacare affects bad business practices

Updated

The Affordable Care Act–the full implementation of which is effectively guaranteed by Obama’s reelection–does intervene in business practices. Simply, the law urges companies employing more than fifty low-wage workers to offer health insurance. If the companies do not abide and if those employees qualify for subsidies in state health exchanges, they will be penalized, per worker, an eighth of the cost of the average health insurance plan  (roughly $2,000 per worker). Is this meddling? Yes. Is it meddling for good reason? That’s a much better question.

For many employers, paying the tax will be cheaper than providing health insurance for their employees. Unsurprisingly, this extra cost has a number of business owners complaining that Obamacare is going to hurt the bottom line. In August, Papa John’s CEO and founder John Schnatter said the law will raise pizza prices. ”If Obamacare is in fact not repealed,” Schnatter said, “we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto consumers in order to protect our shareholders best interests.”

On The Last Word, msnbc analyst Ezra Klein argued that this might not be such a bad deal for Papa John’s.

“Richard Nixon’s health-care plan–proposed during the Twinkie era–would’ve forced them to pay 75% of the cost. Bill Clinton’s would have asked them to pay as much as 80%. But it still gives the CEO of Papa John’s every reason to hate the Affordable Care Act. No corporation likes being told to increase its costs. But you know who that helps? Businesses that have taken another approach to profit–the ones that have sought success by paying their workers good wages, giving them reasonable benefits, and delivering a higher quality product.”


More recently, Denny’s franchisee John Metz vowed to slap a 5% “Obamacare” surcharge on customers’ bills. “If I leave the prices the same, but say on the menu that there is a 5% surcharge for Obamacare, customers have two choices. They can either pay it and tip 15 or 20%, or if they really feel so inclined, they can reduce the amount of tip they give to the server, who is the primary beneficiary of Obamacare,” Metz told The Huffington Post.

Metz was quickly rebuked by Denny’s CEO John Miller after several other franchisees received angry calls and calls for boycotts. ”We recognize his right to speak on issues, but registered our disappointment that his comments have been interpreted as the company’s position,” Miller said in an email to The Huffington Post. By threatening to charge customers directly via an Obamacare surcharge, instead of simply raising the prices on his products, Denny’s franchisee John Metz was making a political statement. It backfired on him, and on Denny’s franchisees across the country, like Abdo Mouannes in Florida, whose sales and traffic dropped after Metz’s remarks went viral.

And Tuesday John Schnatter released a statement clarifying his own position on the matter, faulting the media for overblowing the story:

The reporter asked what I believed Papa John’s franchisees would do in response to Obamacare, not what Papa John’s would do. In fact, her question was “wouldn’t some business owners just cut people down like 34 hours a week so they wouldn’t have to pay for health insurance?”

My answer: “It’s common sense.”


Here, Schnatter gets to the crux of the issue. The “employer responsibility” provision in the ACA aims to incentivize offering health insurance to low-wage employees. By imposing the penalty on companies that refuse to do so, Obamacare forces them to swallow greater costs, which translates to higher prices and a competitive disadvantage in the marketplace. This elevates, in turn, companies who do provide health insurance to all–like Costco, for instance.

But business owners like Schnatter don’t see it like that. For them, it’s “common sense” to find loopholes, like cutting employee hours below the full-time threshold, which allow them to avoid the penalties altogether. No one should be surprised by this; Schnatter vowed to “protect our shareholders’ best interests.”

Nick Hanauer, a venture capitalist from Second Avenue Partners and guest on The Last Word, said Papa John’s complaint is a classic example of why our economy is in such tough shape.

“This idea that if we just keep squeezing workers at the bottom, that somehow we’ll get more prosperous is obviously, categorically untrue. Look, if there was a truth to any of these arguments, given how rich  the rich have gotten for instance, given how profitable corporations have gotten in the last 10 years, we would be drowning in jobs and prosperity. It’s the opposite of true. The way you animate prosperity in a capitalistic economy is by raising the bottom and using the surpluses.”


Obamacare won’t rid the world of stingy employers. But the ACA is trying to give back a little of what businesses and their owners have have kept for themselves over the last thirty years of wage stagnation and union weakening. It’s meddling, no doubt about it. But maybe we could do with some.

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How Obamacare affects bad business practices

Updated