Does Papa John’s Have a Legitimate Gripe About the Affordable Care Act?
Papa John’s and some other large chain restaurants are hopping mad that the Affordable Care Act will require them to provide health care coverage to their employees or pay a penalty or whatever you want to call it. I can understand why they’re upset. After all, if the employer is paying the minimum wage of $7.25 per hour that only adds up to $14,500 in gross wages for a person working 40 hours per week, 50 weeks per year. Average family coverage costs more than $15,000 per year so it’s pretty clear Papa John’s won’t be a position to afford that.
The ACA attempts to preserve and broaden employer coverage at the same time that it expands Medicaid eligibility to everyone. It essentially includes a social contract that employers have some responsibility to contribute toward coverage for their employees. That’s to keep down the public cost and to prevent employers from acting as free riders by dumping employees into Medicaid at a cost to everyone.
The way the law works is complex, but if we accept Papa John’s CEO (and Romney booster) John Schnatter’s estimates at face value, the cost of a pizza will rise between 11 and 14 cents. (Frankly I would have guessed it would be more.) I’m sure there are plenty of other factors that influence price as much as that, so I kind of doubt it’s going to kill them.
Nonetheless there are alternatives to placing responsibility on employers. One is the status quo –which results in a lot of people who lack coverage. Papa John’s may favor that, but many people don’t. The other alternative is to have a single payer system like most countries in the world. If the ACA doesn’t work out I think there’s a reasonable chance we’ll get there over the next 20 years. If we do it will because companies like Papa John’s found a way to wiggle out of their responsibilities under ACA –whether by shifting employees to part-time, reorganizing their businesses into smaller units that aren’t affected by the mandate– or some other mechanism.
David E. Williams is President of the Health Business Group, strategy consultant in technology enabled health care services, pharma, biotech, and medical devices. Formerly with BCG and LEK. MBA (Harvard), BA (Wesleyan).
Williams has written the Health Business Blog every business day since 2005.