White Castle Says Health Law Will Eat Up 55 Percent Of Net Income

white_castleWhite Castle is complaining that a single provision in the new health care law — the $3,000-per-employee penalty on companies whose workers pay more than 9.5% of household income in premiums — will “eat up roughly 55 percent of its yearly net income after 2014“:

White Castle, which currently provides insurance to all of its full-time workers and picks up 70 to 89 percent of their premium costs, believes it will likely end up paying those penalties. The financial hit will make it hard for the company to maintain its 421 restaurants, let alone create new jobs, says company spokesman Jamie Richardson. White Castle employs more than 10,000 people nationwide, and more than 1,200 in Ohio.

Though advocates of the health insurance bill say its reforms will boost employment, House Republican Leader John Boehner of Ohio, a vocal foe of the changes, says White Castle’s analysis shows how the law’s “job-crushing” impact will be most severe in lower-income areas, where jobs like those at White Castle are most needed.

“The irony is that in the name of expanding health care coverage, the administration is making it harder than ever for unskilled workers to get started in the workforce,” Boehner said in a missive on White Castle’s plight.

These kinds of wild predictions help feed the Republicans opposition machine, but they have very limited basis in reality. The new employer requirements do not go into effect for another four years and while costs will certainly increase, it’s fairly difficult for businesses to predict what workers will be spending on health insurance premiums (much less what percentage of their household income will go towards health care costs). On its merits, the provision makes sense. Businesses will face fines because the provision is designed to prevent employers from shifting costs to the employee and protect families from spending too much on health insurance. That’s particularly important for the low-paid fast food workers who receive their health insurance coverage from White Castle.

It’s also worth noting that “the costs will increase and jobs will leave” mantra has not proven true in the past. The city of San Francisco requires employers with “at least 20 workers that do not provide health care” to “give part of each employee’s wages to the city as a fee to help pay for the $200 million program.” Businesses complained that the new requirements would increase costs, but on the whole, their fears have gone unrealzied. Some restaurants have added “a four percent health care surcharge on menus” but there is no evidence that the provision is adversely affecting employment. In fact, “Neighborhood restaurants, where restaurants tend to be affordable and supported by locals, have generally received pretty good acceptance of the program,” while “restaurants in tourist and business travel areas are getting a lot more negative push-back.” Even so, they have not reported a decline in sales.