Paul Bedard – Franchisors warn Obamacare will halve profits

[Taco Bell franchise owner David Barr] pulled out his PowerPoint showing how funding Obamacare will cut his…profits in half overnight. With simple math…he spelled out that [his] only choice is to slash employee hours so they aren’t eligible for company-paid health care, or stop offering insurance and pay the $2,000 per employee fine.

Taco Bell

Taco Bell (Photo credit: Wikipedia)

Barr gets it. He was speaking to a convention of the International Franchise Association. He has 23 stores in Atlanta with 421 employees. 109 of them are full-time and he currently covers 30 of them with health insurance.

He pays 81 percent of their health insurance premiums, or $129,000 a year. But:

Under Obamacare, he will have to provide health insurance for all 109 full-time workers, a cost of $444,000, or two and half times more than his current costs. That $315,000 increase is equal to just over half his annual profit, after expenses, or 1.5 percent of sales. As a result, he said, “I’m not paying $444,000.”

Instead, he’s going to pay the fine for not insuring his employees. It’s cheaper:

Providing no insurance would result in a federal fine of $158,000, $29,000 more than he now spends but the lowest cost possible under the Obamacare law. So he now views that as his cap and he’ll either cut worker hours or replace them with machines to get his costs down or dump them on the public health exchange and pay the fine.

This is how Obamacare works. It’s supposed to help the little guy, right? Those who aren’t covered? So Obamacare mandates that employers cover them, or else pay a fine.

But employers aren’t stupid, especially someone like Barr who has had the moxie to build up a franchise with 23 stores. He’ll fire those he can get rid of at least cost to his company, replacing them with machines or offer lesser levels of service to his customers. But he won’t pay for Obamacare. Sorry about that.

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