Skip to comments.Ohio hamburger chain says insurance reform will bite into profits [White Castle, IHoP endangered]
Posted on 07/04/2010 11:03:57 PM PDT by KentTrappedInLiberalSeattle
The White Castle hamburger chain fears that a health insurance reform law adopted earlier this year will put its profits on a downward slide.
The Columbus-based family owned restaurant chain - known for serving small square hamburgers called "sliders" says a single provision in the bill will eat up roughly 55 percent of its yearly net income after 2014.
Starting that year, the bill levies a $3,000-per-employee penalty on companies whose workers pay more than 9.5 percent of household income in premiums for company-provided insurance.
White Castle, which currently provides insurance to all of its full-time workers and picks up 70 to 89 percent of their premium costs, believes it will likely end up paying those penalties. The financial hit will make it hard for the company to maintain its 421 restaurants, let alone create new jobs, says company spokesman Jamie Richardson. White Castle employs more than 10,000 people nationwide, and more than 1,200 in Ohio.
Though advocates of the health insurance bill say its reforms will boost employment, House Republican Leader John Boehner of Ohio, a vocal foe of the changes, says White Castle's analysis shows how the law's "job-crushing" impact will be most severe in lower-income areas, where jobs like those at White Castle are most needed.
"The irony is that in the name of expanding health care coverage, the administration is making it harder than ever for unskilled workers to get started in the workforce," Boehner said in a missive on White Castle's plight.
Boehner's predictions don't mesh with White House Council of Economic Advisors estimates that health care reform will create 320,000 jobs in upcoming years. The White House has said employees at larger companies aren't likely to notice any difference in their insurance coverage, and that changes in the bill will particularly help small businesses by driving down their premium costs and making it easier for them to insure workers.
"While opponents of reform have raised concerns that some of the provisions in the President's proposal will harm small businesses and their employees, the facts, figures, and discussion below show that the proposal will mean tax cuts, no new requirements, and numerous other benefits," said a blog posting from the group's chair, Christina Romer, and its senior economist, Mark Duggan.
That's not how the National Council of Chain Restaurants sees it. Restaurant group vice president Scott Vinson says the entire restaurant industry will have trouble dealing with costs the bill imposes in 2014, including a $2,000-per-worker penalty that companies with more than 50 employees must pay if their workers end up purchasing federally subsidized insurance rather than getting insurance from their employers.
"There is the expense of actually providing the insurance, then the expense of not providing insurance," says Vinson. "It will be expensive either way."
George Ebinger of New Jersey, who owns several International House of Pancakes restaurants, says the penalties for not insuring his 140 workers will cost roughly half as much as insuring them. He figures he will have to raise prices and possibly lay off workers to come up with the $220,000 he anticipates the penalties will cost.
"We are still figuring out how to deal with this," says Ebinger. "Ultimately, either businesses will close or consumers will pay more."
Problems will be felt throughout the retail industry, which employs many entry-level workers, says National Retail Federation vice president Neil Trautwein. He says employers will face tough choices when the mandates become effective in 2014.
"We do worry about this discouraging employment, particularly when employment hasn't taken off," says Trautwein.
But White House Office of Health Reform Director Nancy-Ann DeParle says 97 percent of the nation's companies won't pay any penalties under the new law.
"The principle underlying this bill is: if you don't offer coverage and you have workers who the taxpayers are supporting to get their coverage, than you must make a relatively small contribution," says DeParle. "I understand that they don't like it and believe it will cut into their profits, but it is a relatively small contribution to defray costs to taxpayers."
Steven Kreisberg of the 1.4 million-member American Federation of State, County and Municipal Employees union, questions White Castle's calculations. His union represents food service workers in Ohio public schools and other institutions.
He figures many of the White Castle workers who would end up paying a significant amount of their income for premiums would opt to buy less expensive coverage from a federal exchange.
"Let's not forget that since the worker is declining their coverage, they don't have to pay insurance for that worker," says Kreisberg, the union's health care policy director. "So they would be saving money at the same time as they are paying the penalty."
White Castle recognizes it won't continue paying health insurance bills for workers who buy insurance on the federal exchange, but Richardson says the company predicts its insurance costs would still rise because its healthiest young employees, who make the least money, would be most likely to transfer to the federal program. An exodus of healthy workers from the company's insurance plan would drive up costs for those who remain, the company forecasts.
White Castle, which began offering health insurance to workers in 1924, is also examining whether it would make financial sense for the company to eliminate health insurance coverage altogether and have all its employees buy insurance on the federal exchange, says Richardson.
"It would be incongruent with how we run our business, but we have to think that through," says Richardson. "No matter what, we will do what's best for our team members."
Buy ‘em by the sack!
Funny, I thought White Castle was the new name for 1600 Pennsylvania under Dear Reader.
And here I was waiting for a White Castle in California. Gee, thanks O!
"White Castle recognizes it won't continue paying health insurance bills for workers who buy insurance on the federal exchange"
How will workers buy insurance on the federal exchange if the federal exchange is only for workers who don't have access to employer health care plans?
This is going to be a mess of Biblical proportions.
Just as the dirty Moslem intended.
Reading this story makes me hungry. I wish I had about six of those little gut bombs right now.
No-Its the White Hut
But, you're coronary arteries are glad you don't.
Is the way out to fire all your employees and take them back
as private contractors? It`s been done before.
[But, you’re coronary arteries are glad you don’t.]
The southern version of White Castle is Krystal. The closest Krystal is about 25 miles from my house. I often wonder if that’s a curse or a blessing.
"Six Sliders coming right up!"
People who actually run and operate business say x. Government elitists say y. Who do you believe? I’d say the people who actually have to make payrolls and run businesses but apparently bureaucrats believe they know better.
What, of course, the ObamaCare proponents aren’t telling you is that the whole system is designed to DESTROY private health care and force businesses to turn to the government for health care. Until then, the bureaucrats are more than happy to lie through their teeth about the affects of their monstrosity.
Thanks. I may drive up to Ohio tomorrow.
I love white castle.
But I’ve been in many of them over the years, and from what I see, the workers there are probably responsible for a lot of Obama votes. So I guess they are getting the change they probably voted for.
Krystals is not as good. They are the same shape and stuff, but the flavor just isn’t as good or moist. I don’t know why.
Note the news item mentioned by Rush that they aren't meeting their online deadlines for implementation of various provisions. I don't think any of them have the slightest idea what they're even trying to do. It's just a question of how long the health care and insurance industries can carry on before they start getting slammed with arbitrary and oppressive requirements.
The solution is obvious: White Castle and IHOP start offering Kobe beef and arugula on the menu and the White House will give them a special exemption from the penalties...
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