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Restaurant industry looks for change in health care law

As the Supreme Court moves into its third day of hearings on the constitutionality of the landmark health care law, many in the restaurant industry are nursing hopes that the 2-year-old law either will be overturned or at least altered to become more business-friendly.

Industry associations and restaurateurs have argued for the past several years that The Patient Protection and Affordable Health Care Act of 2010 could cut deeply into earnings, force operators to raise prices, eliminate jobs and slow growth in an already economically challenged environment.

While the court considers four key questions pertaining to the constitutionality of some elements of the act, at the heart of the debate is the law’s central requirement that most Americans purchase health insurance or be subject to a fine — referred to as the individual mandate. However, in the event the individual mandate is indeed struck down as being unconstitutional, the court also agreed to hear another argument addressing whether the law can survive in its abridged form — known as the severability issue.

The National Restaurant Association filed an amicus brief in January throwing its support behind the argument that the entire act should be struck down if the court rules that the individual mandate should be removed. The NRA argued that a health-care law shorn of the individual mandate would drive up employer’s costs for insurance.

Michelle Neblett, the NRA’s director of labor and workforce policy, said the association felt it was necessary for the court to consider that the restaurant workforce demographics “and the characteristics of most restaurant employers means the industry would be subject to a particularly negative impact if the individual mandate is severed from the rest of the act.”

The brief maintains that the foodservice industry is made up chiefly of small employers, and “Congress’s goal of helping small employers provide health coverage would be impeded by the large increase in the cost of health care coverage, which would result if the rest of the Act stands without the individual mandate requirement.

“If the act is implemented without the individual mandate, however, it would affirmatively place small employers, and their employees, in a worse position than they were before passage of the act,” the brief argues.

If the law does not compel healthy, younger employees — who comprise a large portion of the industry workforce — to buy insurance, many will choose not to be covered, Neblett said. “And taking healthy people out of the insurance pool drives up the rates for everyone.”

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While the court continues to hear arguments, other associations are weighing in on the health care issue. Rob Green, executive director of the National Council of Chain Restaurants, said: “On the one-year anniversary of the enactment of the new healthcare law, we rang the bell about the damaging impact the law’s employer mandate and related penalties will have on chain restaurant operators and their small business franchisees.

“Two years in, the industry still doesn’t have relief from the most pressing challenges created by the law. First and foremost, we continue to ask how chain restaurant employers — who operate on exceedingly thin profit margins — will be able to afford to comply with the law while still trying to create jobs and contribute to economic growth,” he said.

One element that the associations have been addressing at the regulatory level is the government’s definition of a full-time employee, and how long the “look-back period” should be to determine who is fulltime and who is part-time. “People are still trying to bring attention to specific issues in health care they find problematic,” said Scott DeFife, executive vice president of policy and government affairs for the NRA.

At the same time, some continue to look for ways to overturn the law’s employer mandate.

“The Health care law’s employer mandate provision is casting a dark shadow with potentially grave consequences over many franchise business owners, creating additional uncertainty about expanding their operations or hiring new workers,” said Steve Caldeira, chief executive of the International Franchise Association. “The mandate puts 3.2 million jobs at tens of thousands of franchise businesses at risk, according to an IFA/Hudson Institute study.”

Caldeira said the study, which is expected to be presented to the House Ways & Means committee Thursday, shows how the law will impact job creation. “The study shows how the mandate will force franchise small business owners to choose between reducing the number of full-time employees or down-sizing their businesses or both — none of which is a prescription for economic recovery,” he said.

In the meantime, restaurateurs are starting to look ahead to 2014 when employers must start offering health-care insurance to their full-time employees, Neblett said.

“There are a lot of conversations going on now,” she said. “About one-third of the industry has looked at their costs and planned ahead and made changes to plans. Another third is waiting to see how the [Supreme Court] case and the elections all play out. And one-third are just worried about running their business and haven’t thought about it much yet.”

Contact Paul Frumkin at [email protected].

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