The Affordable Care Act's requirements have wide-ranging effects on restaurants, but they can be managed
When the Affordable Care Act was being debated, political pundits focused heavily on the problems that it posed to the healthcare and insurance industries. Less attention, however, was paid to the impact it would have on restaurateurs. Yet the ACA’s requirements can affect restaurant owners and employees in big ways.
Studies performed by McDonald’s have shown that ACA compliance will cost between $10,000 and $30,000 per restaurant. And with 14,000 locations in the U.S., those costs can quickly add up. Similarly, Applebee’s has found that its locations in New York alone will face up to $600,000 in fines, which translates into millions of dollars in raised costs across the chain.
While this policy is relatively new, if you’re not prepared for its changes, your restaurant could suffer. That being said, it’s crucial you’re fully informed of the law’s bearing on your business and your employees.
Understand How Your Restaurant Is Affected
The ACA can impact your restaurant in a number of ways.
First of all, restaurants often operate along thin margins while also employing a large workforce. The cost of insuring every full-time employee gets expensive. Without proper cost management, ACA compliance could potentially tip your restaurant from profitability to bankruptcy.
Also, because all full-time employees must have access to coverage, you need to carefully manage and monitor the number of hours worked by each employee and have a real-time list of who is working part and full time.
Specifically, the ACA’s 30-hour workweek rule affects all large employers. With 21 percent of restaurant employees working between 30 and 36 hours weekly—which is more than twice the rate of 8.9 percent that spans across other industries—company owners must make the tough decision to either pay for coverage at the cost of growth or reduce workers’ hours.
And lastly, under the ACA, different restaurants with the same or substantially similar owners are counted as a single organization. Ensuring compliance over a variety of different restaurants is a daunting task that can quickly become convoluted.
Prepare for the ACA’s Changes
Balancing supporting your employees and taking care of your bottom line is a difficult juggling act. But luckily, there are four things restaurateurs can do to manage the ACA’s regulations, including:
Using a multi-tiered strategy. Screen your employees, and enroll those who are eligible for Medicaid. Offer a minimum essential coverage plan to anyone who meets the requirements, and you’ll find that those with Medicaid will decline. Finally, offer a minimum value plan with a high premium and co-pay deductible. Between these three tiers, you’ll be in compliance and ensure a low uptake.
Knowing your options. Take the time to investigate all potential offerings. If you do end up providing coverage, find a provider that reduces costs by taking actions such as offering wholesale drugs, monitoring employee insurance use, and urging preventative care.
Dropping coverage and providing raises. If your organization consists of fewer than 100 people, consider dropping coverage and providing a modest raise to help your employees attain exchange coverage instead. Offer employees information on employee state insurance enrollment, Medicaid, and food stamps. The total cost of all of this is often lower than offering coverage.
Shopping for your plan at multiple brokers. Make sure you find a professional with a solid industry reputation. That may involve acquiring referrals and references from similarly sized organizations. Also, be sure to check that a broker is licensed and registered, and find out if he has a disciplinary record by calling the consumer hotline for your state insurance commissioner.
By taking these steps, you can work to offset the ACA’s impact. And keep in mind that these are not fabricated concerns. A number of restaurants have already been impacted by the new law. Applebee’s CEO Zane Terkel appeared on TV recently to announce that the company could no longer afford to build new locations or hire new workers.
The ACA is affecting companies across all industries, and restaurants are no exception. But by doing a bit of research and taking the above steps, it will be easier to ensure your employees get the most out of the coverage they acquire and keep your business running smoothly.
The opinions of contributors are their own. Publication of their writing does not imply endorsement by FSR magazine or Journalistic Inc.