Industry News | July 11, 2012

NRA Expresses Concerns to Congress Over Health Care

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The National Restaurant Association (NRA) today expressed concerns with the Patient Protection and Affordable Care Act’s (PPACA) impact on restaurants' ability to continue to be engines of job growth.

Jamie Richardson, vice president, government, shareholder and community relations, White Castle System Inc., told the House Government Reform and Oversight Committee that PPACA is already having a chilling effect on restaurant expansion and hiring.

The NRA supports repeal of the law because of concerns that the employer mandate and associated penalties create administrative and cost burdens that could stifle growth. Richardson testified on behalf of White Castle System Inc. and the NRA.

White Castle estimates its current health care plan costs could climb by more than 20 percent in 2014 due to the requirements of the law. The company will be subject to the employer mandate that requires businesses with 50 or more full-time-equivalent employees to offer full-time employees and their dependents health care coverage that is “affordable” and of “minimum value,” or face potential penalties.

The company also would be covered by PPACA’s auto-enrollment mandate, which requires employers with more than 200 full-time employees to automatically enroll full-time employees in a company health plan. The law also includes extensive reporting requirements that could impose additional compliance costs.

White Castle employs nearly 10,000 team members at 408 restaurant locations in 12 states. Nearly three in 10 of the company’s employees have been with White Castle at least 10 years. The company offers a full health benefits package to full-time employees.

Richardson told the committee that because of PPACA’s mandates and regulatory uncertainty, White Castle currently has on hold expansion plans that could add 400 to 500 restaurant jobs in new markets.

“In the restaurant business, we all manage risks, but the uncertainty of the increased costs the health care law brings, not to mention a variety of regulations on other issues, creates a risk that no one can manage against,” Richardson says.

Restaurants are labor-intensive and operate on thin margins with low profits per employee, Richardson told the panel.

“Many in the industry are worried that our slim profits per employee will not be sufficient to cover the additional cost of more employees accepting our offer of coverage or potential penalties that may apply despite our best efforts to provide the required coverage.”

Restaurateurs are also concerned about the absence of definitive guidance for employers about PPACA's requirements, Richardson says. “More than two years after PPACA was signed into law, restaurant operators cannot predict how the law will fully impact their businesses as we do not have any formal guidance or rules on what we must do to comply.”

Richardson urged Congress to enact health care reform that controls costs, including allowing small businesses to pool together to buy insurance at either the state or national level, and to let businesses cross state lines to buy insurance. He said Congress must be sensitive to enacting reforms that function well for labor-intensive industries, such as restaurants, that have lower profits per employee.