After a career in the hotel industry, Mike Ruffer bought a Five Guys franchise in North Carolina. At the Heritage Foundation in Washington, DC, this small business owner offered an example of the Patient Protection and Affordable Care Act (PPACA) hurting workers, entrepreneurs, and economic growth.
Ruffer explained to the audience that because his eight stores in five cities collectively have 147 employees, 60 of whom meet Obamacare’s definition of a full-time employee (those working more than 30 hrs/week), he will either have to offer one-size-fits-all insurance dictated by federal bureaucrats or pay a fine beginning in 2014.
The Washington Examiner's Paul Bedard reports that the entire profits from one of Ruffer’s eight franchises will go to cover his estimated $60,000 in new Obamacare costs – costs that Ruffer says he’ll have to pass onto this customers.
Ruffer said that businesses like his will, in addition to raising prices on consumers, reduce payrolls, or move full-time workers below the 30 hour/week threshold. In the case of his restaurants, these options pose a strategic risk. Raising prices could mean offering a worse “price-value proposition” for price-sensitive customers, while cutting the hours of trained staff could hurt business operations.
In addition, Ruffer said the uncertainties surrounding the PPACA have put future expansion “in a holding pattern.”
This real-world case study reinforces what Bruce Josten, Executive Vice President for Government Affairs at the U.S. Chamber, Dan Danner, President and CEO of the National Federation of Independent Business, Matthew Shay, President and CEO of the National Retail Federation, and Dirk Van Dongen, President and CEO of the National Association of Wholesale-Distributors explained in a recent Politico op-ed asking Congress to repeal the employer mandate:
For employers near the “large” employer threshold, we can expect to see layoffs or dramatically reduced hours. These will be tough decisions, especially for small businesses where employees are like family and benefits options are often discussed and agreed upon collaboratively. The rising cost of the mandated insurance plans will very likely force many businesses to drop coverage entirely and pay the steep penalty, a difficult choice but a necessary one in light of increasingly cost-prohibitive employee coverage. Smaller businesses that might otherwise be eyeing expansion and growth down the road will most likely reduce or cap the number of employees to avoid the expensive mandate in the future.
Health care reform should be about controlling costs and expanding access to affordable coverage, not forcing entrepreneurs to cut hours and curtail investment.
Watch the video of the Heritage Foundation event. If you’re a small business owner, how are you preparing for the health care law? Leave a comment below.