At Restaurant, Delay Is Help on Health Law

The New York Times by Abby Goodnough –

July 9, 2013:

Eric King has worked diligently to keep his family’s 35-year-old seafood restaurant here viable, most recently by expanding the menu beyond its well-loved crab cakes and other traditional dishes to draw a younger, freer-spending crowd.

The restaurant, Shanty Grille, is on track to make a profit this year — about $80,000, Mr. King predicts — for the first time since the economic downturn. Yet the prospect of providing health insurance to every full-time worker or paying a penalty starting in January, a provision of the Obama health care law, has overshadowed the good news.

Businesses with the equivalent of more than 50 full-time employees are subject to the rule, and Shanty Grille hovers right around that threshold.

Then came last week’s announcement that the mandate would be delayed a year after business owners begged the Obama administration for more time. Mr. King, who had been fretting for three years about whether the restaurant would be subject to the mandate and how it would affect the bottom line, was thrilled.

“It gives us another year to plan,” he said Friday, sitting in the Grille’s sleek, newly expanded pub as customers cracked crabs at the bar. “If we fall below the 50, fantastic. If we’re above, then we’ll have another year to figure out how to offset these costs.”

Shanty Grille already provides health insurance to 9 of its 85 employees, paying part of the premium for each at a total cost of about $26,000 a year. The chosen group includes the restaurant’s managers and chefs — skilled workers, Mr. King said, whom “I really want to take care of and retain.”

Others can opt into the plan, but only if they pay the full cost, about $4,700 this year. Only one, a waitress in her 50s, has done so. (Mr. King and his wife and children are insured through a smaller family business across the street, a fish market that does not employ enough people to have to comply with the mandate.)

If Mr. King had the equivalent of 50 full-time employees under the health care law, which uses a complex formula to determine precisely who is eligible for coverage, he estimates that would have to cover a total of 22 employees. That would bring his costs to about $62,000 a year if premiums did not rise, he said.

“If there’s no return on your investment,” he said, “there’s not really a point anymore. I put in 70, 75 hours a week. Is it really worth it?”

Restaurant owners have been among the most vocal critics of the employer mandate, saying it could hurt them more than other businesses in part because their profit margins tend to be low. Some have said they will lay off workers or shift more of them to part-time status to avoid having to comply.

Mr. King thinks his current system is fair — he offers insurance to his most valuable employees, who are also the most likely to stick around — and points to low turnover as evidence that his uninsured servers, busboys, dishwashers, line cooks and hosts are content. Most are young and in good health.

He said “not a soul” among the employees at Shanty Grille had asked him to comply with the mandate.

“Most of my servers are 25 to 30 years old,” he said. “They’d rather take the $200 a month and put it in a bar bill as opposed to insurance.”

Yet at least one of Mr. King’s young, uninsured employees is anxious about not having medical coverage — so much that this week, he is starting a second job that comes with health benefits. The employee, Vince Ritter, a bartender, started working at Shanty Grille a decade ago, when he was 16. The health care law allowed him to be covered under his parents’ insurance plan for the last few years. But next week, when he turns 26, he will by law lose that coverage.

That makes him nervous, he said, because he plays sports and has seen uninsured friends — including a colleague at Shanty Grille who tore a knee ligament on the basketball court — have to pay thousands of dollars for urgent care.

“I’ll be honest with you, if I could have gotten it through here I probably would have just stayed,” Mr. Ritter said. “I love this place.”

Good coverage has always been important to Faye McConnell, the pantry chef, one of the few who get health insurance through the restaurant. She worries that if the restaurant has to cover all full-time workers, her own plan could become more expensive or not as good.

“A business can only put out so much,” said Ms. McConnell, 62, who has worked at Shanty Grille for 15 years. “It might help people, but it seems like it’s also going to hurt people. That’s what I’m totally afraid of.”

Under the health care law, most Americans will be required to have insurance as of January 2014 or face tax penalties. The decision to delay the employer mandate does not affect this broader requirement, the cornerstone of Mr. Obama’s plan to reduce the ranks of the uninsured by 25 million over the next decade.

People who were likely to gain coverage through their employers next year, including Shanty Grille employees, must now either pay the tax penalty — 1 percent of their household’s taxable income or $95 per adult in the household, whichever is greater, in 2014 — or buy their own insurance through newly created markets in their states known as exchanges.

Businesses that do not comply with the mandate will also face penalties. Some employers have said they would prefer paying penalties to providing insurance, which would be more costly. But Mr. King said he could not live with that choice if it meant no longer covering anyone.

“We’d probably close first,” he said. “Even if I only earned a $20,000 profit, I couldn’t look at my employees who helped us get to where we are and say, ‘I’m putting $20,000 in my pocket but I can’t put it toward you guys.’ ”

On Monday, with an adding machine and an Excel spreadsheet, Mr. King determined that he had the equivalent of only 47 full-time employees in the year that ended June 30, according to the complex formula that the law relies on. That was down from 54 for the 2012 calendar year. Mr. King said he had cut back some busboy hours in recent months and had not replaced several employees who left. Meanwhile, he said, some servers worked just below the 130 hours per month that the law considers full time.

Mr. King said he had been trying “to run a little bit sleeker,” not to dodge the employer mandate but to reduce what he said were above-average labor costs for the restaurant industry. Still, he said he was greatly relieved that he might not have to provide insurance to more workers after all. The only drawback is that the restaurant could not grow.

“No more expansion,” he said.

Source: John & Rusty Report via Choice Admin