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Harmful influence

October 03, 2011

President Barack Obama’s latest jobs plan ignores the obvious: That part of the reason for the lack of investment and job growth in the nation is the uncertainty and disincentives engendered by the president’s own policies.

The Patient Protection and Affordable Care Act, the health-care overhaul that Obama pushed through Congress in the face of widespread and persistent public opposition, requires all employers with 50 or more employees to offer health-care benefits to every full-time worker or pay a penalty of $2,000 per worker (minus the first 30). This could impel employers to avoid hiring additional workers if the new hires would push them to the 50-worker threshold, let some workers go in order to drop below the threshold, or create more part-time positions rather than full-time ones. Employers also would have an incentive to drop coverage, because the penalty for doing so is considerably cheaper than the cost of health insurance.

According to a survey by McKinsey Quarterly, nearly a third of employers will “definitely or probably” stop offering coverage when the mandates kick in. According to the global management consulting firm: “ At least 30 percent of employers would gain economically from dropping coverage, even if they completely compensated employees for the change through other benefit offerings or higher salaries.”

Workers without employer coverage would have to seek coverage through health-care exchanges that federal law requires each state to set up, using federal subsidies to help pay for the coverage — shifting health-care costs from employers to taxpayers.

The president’s health-care mandates could be particularly harmful to central Ohio, home of many national chain restaurants. This industry operates on such slim profit margins that the cost of complying with the mandates could easily outstrip profits.

A case in point is White Castle, a 90-year-old, family-owned restaurant business based in Columbus. Just under half of the 10,000 employees participate in the company’s health-care plan.

White Castle is now “giving long pause” to expansion and hiring decisions pending the start of the health-care overhaul in 2014, said Vice-President Jamie Richardson. “It affects mindset. … It has slowed the pace of investment. It has slowed the pace of remodeling current restaurants and replacing older ones.”

Further, the act says that if employers offer health care, it must be “affordable,” imposing a $3,000 penalty if an employee’s health-insurance premium is greater than 9.5 percent of his household income. This could be a problem for restaurants in low-income neighborhoods, where a health-care premium could more easily exceed the threshold. Businesses in this situation would have an incentive to move to affluent neighborhoods, where household income is likely to be greater, lowering the odds of incurring penalties. They would have an incentive to move out of low-income neighborhoods.

The Congressional Budget Office estimates 800,000 jobs could be lost because of the bill. If Obama is serious about jobs, he should repeal these onerous employer mandates, said Rep. Pat Tiberi, R-Genoa Township. He pointed to White Castle and IHOP, another central Ohio business, to illustrate the potential for damage.

Scott Womack, an Indiana-based IHOP franchisee expanding to central Ohio, met with Obama administration officials on Sept. 15 to press for changes.

“This will be devastating,” said Womack, who is building on Hilliard-Rome Road and has opened already in Reynoldsburg, Lancaster and Chillicothe. His cost for complying with the mandate would be nearly twice his per-employee profit, he said.

“We don’t earn enough money to cover the legislation,” Womack said, adding that the law needs to be fixed “so we don’t have a bunch of empty restaurants.”