Legislative outlook: Pizza shops and health care reform

Jan. 31, 2010
Pizza operators may have breathed a sigh of relief when Scott Brown spoiled Democrats' plans for health care reform. But while the filibuster-proof majority may be gone, the legislation isn't dead, with Congressional leaders examining their options.   As the two versions of the bills now stand, operators have plenty to concern them. Essentially, the separate legislation passed by the House and Senate would require most employers to offer health care coverage to offer health care coverage to their employees. Independent operators and small franchisee businesses would be impacted the most, especially by the House version. In that one, a smaller number of operators — only those with payrolls under $500,000 — would be exempt.  
Key differences in health care reform legislation

House version:    • Mandates employers provide essential benefits package  • No provision to grandfather in existing coverage  • Exempts small business with payrolls under $500,000  • No waiting period

Senate version:
 • Mandates employers provide essential benefits package  • Grandfather clause for employers with existing plans  • Offer employers choice between adding coverage or paying free-rider penalty  • Exempts small businesses with fewer than 50 employees  • Includes 90-day waiting period, with 60 days penalty free Mandates employers provide essential benefits package
To lessen the impact on the industry, especially its independent operators and smaller franchisees, the National Restaurant Association has worked hard to fight for several key provisions. Those efforts have resulted in the Senate version including a provision for a 90-day waiting period, 60 days penalty-free, before an employer offers coverage. The waiting period would accommodate for the industry's high turnover rate, especially at quick-service restaurants. The House bill does not have such a waiting period.
The NRA also has called for a change to the definition of 'full-time employee' to one that better fits the industry's flexible scheduling: 390 hours in a calendar quarter (13 weeks) as opposed to the standard weekly definition.   The association has pushed for as strong a small business exemption as possible. The Senate bill exempts businesses with fewer than 50 full-time employees from the mandate, a significant difference between the House's exemption of those with payrolls under $500,000.   Other provisions the association is lobbying for include an exemption for part-time and seasonal workers and maintaining the current regulatory framework of the Employee Retirement Income Security Act (ERISA) that allows large, multi-state employers to offer consistent health benefits to employees.
Operators look at cost   When local or state legislators mandate healthcare laws, they seem to have little consideration for the changes that large chains like Domino's and Pizza Hut must undergo for one market. But even a national program means more expenses for all operators.    Cost is the primary reason most operators do not already offer health care plans for their employees. Some independent restaurant owners cannot even afford the coverage for themselves.
Rick Sampson is president and CEO of the New York State Restaurant Association, a market where pizza chains and pizzerias are especially concentrated. He sees the dilemma through operators' eyes.
"If health care was affordable, small business would absolutely make it available to employees because it's just good business," Sampson said. "[They] want to keep these people."  
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Operators fear the impact of taking on additional expenses — potentially an additional 8 to 10 percent to offer health coverage — when they already are facing some of the toughest economic challenges in recent memory.   Sampson said he has had a number of operators express their concern over the legislation, especially the health care portion. Essentially, they fear the extra operating expense will push their businesses to the breaking point.   "I have had restaurants report back to me that if this goes into effect, 'I will have to close my doors,'" he said. "This industry is so sensitive to raising prices because the public has a choice. They don't have to eat out. They can stay home."

Topics: Hiring and Retention

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