The Impact of ACA on Business Costs

Uhhh pretty sure thats illegal in some way.

not sure how it works in the States but I'm pretty sure in Canada the competition bureau would have a field day on any business that dared to advertise prices like that.

Well as far as the Supreme Court and the Obama Administration is concerned, it is a tax. Many restaurants I go to will put on the bill if you are paying a sales tax, some sort of resort or entertainment tax as well (check those bills at Disney or in Vegas).

In the crafting of the legislation, the targets of the new employer requirement were the larger businesses employing people at or below full time with little or no overtime as well as at or near poverty level wages. These are those very people who worked 2 jobs 50-80 hours a week and thus could not meet poverty requirements to qualify for medicaid. The choice was work enough to pay for rent, get you kids clothes, food, etc. or get below the poverty line and wait for medicaid and food stamps, probably have to move into low income housing.

And again, the jockeying for political positions aside. This is America in 2012. The fact that we have whole businesses or industries whose livelihood still depends upon below poverty wages and no benefits is appalling. Tough times or no, we pay the price for that thumb up our asses when we had a chance to fix this during the good times.

5% surcharge at Denny's? Guess Obamacare is cheaper than I thought.

How is Obamacare impacting these companies? My understanding is there is no impact if you have less than 50 employees and don't offer coverage (over 50 you pay a penalty for not giving employees coverage). Or are employees of a Papa John's franchise, for example, considered employees of the larger corporation and not the specific franchise?

Chairman_Mao wrote:

5% surcharge at Denny's? Guess Obamacare is cheaper than I thought.

Considering the impact a Grand Slam breakfast would have on an individual's healthcare cost, maybe Denny's is just trying to do their part to drive customers away from expensive and unhealthy options

billt721 wrote:

How is Obamacare impacting these companies? My understanding is there is no impact if you have less than 50 employees and don't offer coverage (over 50 you pay a penalty for not giving employees coverage). Or are employees of a Papa John's franchise, for example, considered employees of the larger corporation and not the specific franchise?

I quite frankly am not sure. A typical franchising agreement has the location owned by the proprieter, and they pay a licensing fee as well as costs for supplies to the parent company. Dunkin Doughnuts, most fast food chains, Pizza Huts, gas stations work this way.

Wal-Mart and Starbucks began to seriously buck the trend by offering investment in a subsidiary. The fees are less, but the parent company takes a larger cut of profits. This has an advantage in that it allows for much more rapid expansion than traditional franchising arrangements. Subsidiaries that are established provide insurance against initial loss that a traditional franchise might incur. As such, I am not entirely clear on the precise legal classification of an individual Wal-Mart as it pertains to these laws.

Where a BP station with 12 employees is seen as its own business, it is my understanding that all employees at a Wal-Mart regardless of the size of a branch are seen as employed by the parent company.

My reading has it that Papa Johns licenses via fairly typical franchising means. While there is some secrecy there, I would hazard a guess that every pizzeria is independently owned and thus each employee is employed by the franchise and not Papa Johns corporate.

My initial reaction to the news from Papa Johns, that it was the corporate offices that would be seeing the cuts, not the individual pizzerias. It never entered into my mind that a franchise might be affected.

Greg wrote:

The Denny's owner has a great idea. Just add the taxes onto the bill. The airlines have found this approach to be extremely lucrative.

Pappa Johns could have done the same thing. Advertise the $9.99 pizza then add on the $1 Obama Health Care Tax Surcharge.

The customer is going to pay for the increased health care costs one way or another, I could care less what they label it.

This is not taken nearly far enough. I also want to see that Denny's owner's profit margic to be itemized clearly on the bill, so I know exactly how much money goes into HIS pocket, too.

Greg wrote:

The Denny's owner has a great idea. Just add the taxes onto the bill. The airlines have found this approach to be extremely lucrative.

Pappa Johns could have done the same thing. Advertise the $9.99 pizza then add on the $1 Obama Health Care Tax Surcharge.

The customer is going to pay for the increased health care costs one way or another, I could care less what they label it.

Denny does have an interesting point. The problem is how waitstaff are typically paid most of their income: directly from customers, not out of the operating budget for the restaurant itself. Without Obamacare, the marginal cost of hiring extra wait staff is incredibly low for the proprietor in most cases (the two buck or so waitstaff wage, training, and uniforms and other related materials or whatever).

With Obamacare, the cost of health care will represent a huge percentage of the cost associated with a waiter or waitress.

And, in other industries, employers can simply cut wages to fund the cost of health care as one way to make the Obamacare mandate a zero-sum game. For waitstaff, that is impossible, since their wages are paid by customers. Denny is trying to push awareness of this situation to his patrons.

I don't know that Denny's "solution" is actually good or anything. If I were interested in fixing this problem, I'd probably get rid of the waitstaff "minimum wage" (which employers pay on top of tips) for tip-based workers who receive employer-provided insurance due to the Obamacare mandate; napkin math tells me that'd just about cover it.

The customer is going to pay for the increased health care costs one way or another, I could care less what they label it.

Increased health costs? Because it's less expensive to pay for emergency treatment than preventive care? Really?

Robear wrote:
The customer is going to pay for the increased health care costs one way or another, I could care less what they label it.

Increased health costs? Because it's less expensive to pay for emergency treatment than preventive care? Really?

First off, I am not opposed to all Americans having healthcare and I think single payer would be a better system than we have now.

You are asking two questions.

Increased healthcare costs? - Yes businesses that never had to pay for healthcare are now going to have to offer the benefit or pay the fine. This will affect consumer prices. Businesses will if at all possible raise prices. Some will be able to get away with it and others will not depending on competition and price sensitivity.

Additional revenue increases like the medical device tax will increase prices for consumers on everyday medical devices like eye glasses and contacts, let alone high end implantable medical devices. The ACA reduced the tax free money that ordinary Americans can set aside to pay their medical bills in two ways. First, over the counter drugs/devices were exempted from the tax break and this year the tax break has been cut in half. I am paying more for my health care directly tied to the ACA. Note that I am specifically excluding deductible increases, copay increases, and premium increases because I do not know if they are directly tied to ACA.

The second half of your question is more difficult. Millions of people will seek preventative care and potentially overwhelm the infrastructure. Based on history, yes, the government has a pretty good track record of underestimating the cost of programs.

I think it's pretty obvious that ACA is going to increase expenses in the near term. The nature of its funding means a few things:

1) Employers of lots of unskilled labor (especially tip earners) will increase their expenses a lot. So people like Denny and Papa have to deal with this (either passing on the costs to consumers or to their employees)

2) People who are currently insured are going to face increased expenses (for reasons Greg points out)

3) High income people will face tax increases

Preventative care will almost surely reduce costs - but not in the near term. It will take years for the benefits of preventative medicine to actually start keeping poor people out of the ER. So even though there will be a spike in primary care demand, there initially won't be a relaxation in emergency care demand - stressing the medical system and increasing costs as it adapts.

Obamacare does cap premiums - essentially it limits the profit and overhead insurance companies are allowed to have. But this doesn't mean premiums won't go up naturally due to a shortage of primary care facilities and physicians as these facilities "ramp up" to meet the demand of the larger number of insured persons.

Here's what bugs me about this, healthcare premiums the business owners were paying for their employees were increasing by 20% or more annually. This has been going on for a decade but now that the ACA is being implemented it's suddenly a hardship that they have to use as a publicity stunt. In the past they would have just raised prices and been done with it.

Considering the menu at your average Denny's and it's impact on the public health, there should be a surcharge for poisoning the populace.

Greg wrote:

Additional revenue increases like the medical device tax will increase prices for consumers on everyday medical devices like eye glasses and contacts, let alone high end implantable medical devices. The ACA reduced the tax free money that ordinary Americans can set aside to pay their medical bills in two ways. First, over the counter drugs/devices were exempted from the tax break and this year the tax break has been cut in half. I am paying more for my health care directly tied to the ACA. Note that I am specifically excluding deductible increases, copay increases, and premium increases because I do not know if they are directly tied to ACA.

The second half of your question is more difficult. Millions of people will seek preventative care and potentially overwhelm the infrastructure. Based on history, yes, the government has a pretty good track record of underestimating the cost of programs.

The medical device tax will only increase costs if manufacturers continue to hold their margins where they are. Medical device manufacturing as it currently stands is one of the most profitable industries in the world. When we see competitive situations in hospitals it's not uncommon for a supplier to drop their prices by 20%. That's only for the commodity suppliers. The margin on some of the high volume clinical preference items (aka implantables) is INSANE. We've seen figures as high as 300%. A 3% fee is laughable for companies like Medtronic, Stryker, DePuy, Synthes etc. The overwhelming majority of device manufacturers are doing VERY well.

There is one variable that isn't being included in your calculations. That's the "surcharge" you currently pay on your premiums to cover those without insurance. The challenge is no one seems to know how much they really are. Intuitively, one would thing that those charges would go away once the ACA is implemented but my hunch is that they'll stay an go right into the pockets of insurers.

Bear wrote:

The medical device tax will only increase costs if manufacturers continue to hold their margins where they are. Medical device manufacturing as it currently stands is one of the most profitable industries in the world. When we see competitive situations in hospitals it's not uncommon for a supplier to drop their prices by 20%. That's only for the commodity suppliers. The margin on some of the high volume clinical preference items (aka implantables) is INSANE. We've seen figures as high as 300%. A 3% fee is laughable for companies like Medtronic, Stryker, DePuy, Synthes etc. The overwhelming majority of device manufacturers are doing VERY well.

Some companies are thinking of adding the 2.9% Federal Excise Tax as an itemized line item on the device's invoice. Again, all companies try to pass on their increased costs to the buyer regardless of the market. Of course, the market decides whether they are successful.

If the excise tax was designed to punish these companies for making too much money, then the ACA should have nationalized the companies or put them under heavy regulation like utilities (used to be).

Bear wrote:

There is one variable that isn't being included in your calculations. That's the "surcharge" you currently pay on your premiums to cover those without insurance. The challenge is no one seems to know how much they really are. Intuitively, one would thing that those charges would go away once the ACA is implemented but my hunch is that they'll stay an go right into the pockets of insurers.

I agree with you that the insurers will hold that money. I think it would be a very idealistic position to think that healthcare premiums will decrease on an ACA dividend. The insurance companies will certainly find methods to avoid returning substantial monies. The ACA was corporate welfare for insurance companies and they helped write the legislation. They understood what they were getting into before the government did.

I will predict that healthcare spending as a fraction of GDP does not fall significantly from the current level. I think that this is the fairest metric as it scores both the money that is spent privately and publicity.

Bear wrote:

Here's what bugs me about this, healthcare premiums the business owners were paying for their employees were increasing by 20% or more annually. This has been going on for a decade but now that the ACA is being implemented it's suddenly a hardship that they have to use as a publicity stunt. In the past they would have just raised prices and been done with it.

Having a healthy workforce has never really benefited an organization with a workforce that consists largely of unskilled laborers, though. People like Denny and Papa previously (presumably) only insured a minority of their workers (the valuable ones who they might otherwise have trouble retaining). So these guys never had to care much about the cost of health care.

I mean, I'm not going to lose sleep over these guys, but they do have a real point here. It's a reasonable question to ask: why should Denny and Papa foot the bill for rising health care costs now?

The answer is basically "because mandating the expansion of (the broken) employer provided insurance paradigm was politically easier to do than to implement single payer." That's a lousy answer, but it's the one we're stuck with.

gore wrote:

The answer is basically "because mandating the expansion of (the broken) employer provided insurance paradigm was politically easier to do than to implement single payer." That's a lousy answer, but it's the one we're stuck with.

Bingo. The good news for single payer proponents is after the last defined benefits plan is destroyed, healthcare benefits will be next.

Adding a 5% "Obamacare surchage" to a bill just seems like a hamfisted way of the business owner making a political statement and doesn't have anything to do with actual expenses. It's the equivalent of a guy shooting a bunny rabbit on a live internet feed while screaming "This is because of you Obama! You made me do this! YOU!". If you're going to start making out your bills that way I'd liked to see an itemized statement showing what percentages of the 99 cents I paid for that cheesburger went to utilities for the building, transportation, raw materials, preparation, accounting, marketing, franchise fees, local taxes, county taxes, federal taxes, building maintenance, salary, etc. I mean really, it's getting ridiculous.

As far as a transition to a single payer system goes, I love the idea but here's my primary concern. A single payer system would require a fairly hefty increase in the individual tax burden. Right now, to use arbitary numbers, let's say an employee making 50k a year also has an extra 30k in benefits that the employer is paying for their health insurance. If it was announced tomorrow that businesses no longer had to provide healthcare I seriously doubt the employer is going to then start paying that same employee 80k a year, they're just going to give a big sigh of relief that they no longer have to pay that "unseen bonus" of 30k a year for that employee. Because of that you would have people taking massive hits to their income from the necessarily increased tax burden while businesses would likely not be increasing their pay by a commensurate amount.

Kehama wrote:

Adding a 5% "Obamacare surchage" to a bill just seems like a hamfisted way of the business owner making a political statement and doesn't have anything to do with actual expenses.

The intent would seem to be letting customers know that the waitstaff are effectively getting a pay raise due to the Obamacare mandate, and to let them know that part of their bill is funding that pay raise. Therefore, customers need not feel pressure to tip as much as they did prior to Obamacare.

Customers can "opt out" of the pay raise on an individual basis by simply adjusting the amount they tip downward in an amount equal to the Obamacare-funding price increase.

I actually think it's kind of clever, but it's probably too confusing to really work. I think people will continue to tip the same as before regardless of how this information is presented to them.

John Metz said he will add a 5 percent surcharge to customers' bills to offset what he said are the increased costs of Obamacare, along with reducing his employees' hours.

Of course, if he's cutting hours to avoid the insurance requirement *and* adding a surcharge, that makes the whole scenario rather questionable.

Increased healthcare costs? - Yes businesses that never had to pay for healthcare are now going to have to offer the benefit or pay the fine. This will affect consumer prices. Businesses will if at all possible raise prices. Some will be able to get away with it and others will not depending on competition and price sensitivity.

You are glossing here, and unfairly. Businesses with under 50 employees won't have to pay the fine, as long as their employees get tax credits under the individual exchange in their state. Small businesses which now offer health insurance get a 35% tax credit, going up to 50%, to help them along. Businesses with less than 100 employees get access to an exchange that aggregates them with other small businesses, to increase their buying power. So the number of businesses that have to pay the fine, and won't get enough help to make it worth their while to offer insurance should be pretty small.

The law exempts 5.8 million of 6 million firms in the country. Of those, two-tenths of one percent - about 10,000 - are expected to be exposed to this fee, and there are mechanisms in place to help them start providing services at less cost than it would have been in the past.

This has been designed to reduce the impact and assist companies, not punish them.

Additional revenue increases like the medical device tax will increase prices for consumers on everyday medical devices like eye glasses and contacts, let alone high end implantable medical devices. The ACA reduced the tax free money that ordinary Americans can set aside to pay their medical bills in two ways. First, over the counter drugs/devices were exempted from the tax break and this year the tax break has been cut in half. I am paying more for my health care directly tied to the ACA. Note that I am specifically excluding deductible increases, copay increases, and premium increases because I do not know if they are directly tied to ACA.

As you may not know, but should, those latter are now capped and tied to performance - by the ACA (see healthcare.gov). In my case - I have United Healthcare - they've stopped raising prices, due directly to the ACA. I think the last premium increase was September of 2011. They also offer a new high deductible product that is mostly preventive care for younger, healthier people. So my personal experience is that for the first time in 20 years or so, my healthcare costs are not going up significantly year over year. For me, that's real savings.

The medical device tax is 2.3% of the selling cost of the device. There's a *huge* fraud market in medical devices, and much of it involves predatory pricing, since consumers don't generally see the costs of devices they purchase through third parties. I suspect this is designed to make that more expensive to the folks who are over-charging insurance companies, especially since it's based on the retail price. Basic economics - if you want to keep your sales high, lower the price a bit. Right now, medical devices are priced excessively on the whole.

Same reasoning goes for removing the tax incentives. The overall idea is to deflate the medical device pricing and reduce the hidden cost to us all of medical devices that was enabled by the old system.

FSAs were indeed cut, and they can no longer be used to purchase OTC drugs or devices without a prescription, which reduces the scope. Further, by reducing this, the amount of money that can default to the insurance company at the end of the year is reduced. I suspect that's a part of the reasoning behind that change, but I'm not sure.

The second half of your question is more difficult. Millions of people will seek preventative care and potentially overwhelm the infrastructure. Based on history, yes, the government has a pretty good track record of underestimating the cost of programs.

54 million people *with* insurance gained preventive health care in 2011. These were features added to their insurance. Did the system break under the load? I mean, that's bigger than the entire pool of uninsured the ACA is intended to assist.

It looks like as much as 17% of the non-elderly population could gain insurance coverage through Medicaid and tax credits in 2014, according to Kaiser. But how many of those are already using emergency services? I'd argue that while this will certainly add to some workloads, the reduction in things like unnecessary testing and the less time-intensive nature of preventive medicine will keep the burden from being overwhelming. But certainly staffing is a concern. How is Massachusetts doing in that regard?

A lot of your concerns above are somewhat overblown, and if you're so inclined, I'd urge you to check out the details at healthcare.gov, because much of what you cited demonstrably has less impact than you are worried about. And that's a good thing.

The Daily Show did a good drum up on this.

It is the Spotted Owl all over again.

For those who have not seen this PBS documentary, I suggest seeking it out. The Spotted Owl in the late 80's became the scapegoat for all of the woes facing the American Timber Industry, and Milling Industry. Pressure was put on the EPA to vote to eradicate the Spotted Owl in our national parks, for what would amount to a 6% increase in timber production.
The thing is foreign buyers on US timber, cheap South American timber, automation, and alternative products were the real things harming the timber industry. Even after the God Squad elected to kill the owl, the timber industry continued to decline.

But no one wants to suggest that the free market is a ruthless bitch to poorly run and archaic businesses. Let's blame moderate healthcare reform for the woes on the coal industry not a National rededication to get off of coal. And it is not the 1 million free pizzas or the waiving of franchise fees that is bad business for Papa Johns or the rising prices on grain and dairy and meat, it is a 3-5% increase in operating costs.

Robear wrote:

The medical device tax is 2.3% of the selling cost of the device. There's a *huge* fraud market in medical devices, and much of it involves predatory pricing, since consumers don't generally see the costs of devices they purchase through third parties. I suspect this is designed to make that more expensive to the folks who are over-charging insurance companies, especially since it's based on the retail price. Basic economics - if you want to keep your sales high, lower the price a bit. Right now, medical devices are priced excessively on the whole.

Here's my cool story bro.

I have sleep apnea. Needed to get a CPAP machine for treatment. Since I was on a HSA and had to pay out of pocket when the hospital offered to "have their supplier contact me" I decided to look around first and see what they cost direct. The most expensive whiz bang feature loaded one that met my needs ran $800. When the supplier called me they were going to bring it out to the house and show me how to use it (there's like 3 buttons on it, it's not a complicated device). I asked them which model they were going to give me. The phone grunt didn't know. I asked how much they were going to bill my insurance... again, didn't know. Demanded to speak to a supervisor, eventually found out they were going to charge just north of $2000. I told them to stuff it and bought direct from the online site for like $700.

Oh and the fun part about having Sleep Apnea? Even though I have had zero complications and zero costs since 2007, because I have the condition I have been rejected by every single private insurer I've applied to. 33 years old, 5'10, 210lbs, pretty good health all around... uninsurable.

Many of you know me as rather fiscally conservative on this forum, but f- the insurance companies. I hope we go single payer. I'm done with them.

One of us... One of us...

I have sleep apnea. Needed to get a CPAP machine for treatment. Since I was on a HSA and had to pay out of pocket when the hospital offered to "have their supplier contact me" I decided to look around first and see what they cost direct. The most expensive whiz bang feature loaded one that met my needs ran $800. When the supplier called me they were going to bring it out to the house and show me how to use it (there's like 3 buttons on it, it's not a complicated device). I asked them which model they were going to give me. The phone grunt didn't know. I asked how much they were going to bill my insurance... again, didn't know. Demanded to speak to a supervisor, eventually found out they were going to charge just north of $2000. I told them to stuff it and bought direct from the online site for like $700.

The only reason I know any of that stuff is that I occasionally sell computer equipment which ends up in fraud/waste/abuse detection programs. This is the kind of stuff that the ACA is designed to reduce.

I'm glad you were able to figure it out; that would not have occurred to me because I don't have an HSA. That's what people don't get; the *system* needs to change, because isolating people from pricing is one way to generate abusive hidden pricing that we all pay for (much less fraud.)

Oh and the fun part about having Sleep Apnea? Even though I have had zero complications and zero costs since 2007, because I have the condition I have been rejected by every single private insurer I've applied to. 33 years old, 5'10, 210lbs, pretty good health all around... uninsurable.

In 2010, the ACA changed this for people who have not been insured for six months. In 2014, you won't be able to be denied insurance due to pre-existing conditions at all. For what it's worth.

bandit0013 wrote:

Here's my cool story bro.

I have sleep apnea. Needed to get a CPAP machine for treatment. Since I was on a HSA and had to pay out of pocket when the hospital offered to "have their supplier contact me" I decided to look around first and see what they cost direct. The most expensive whiz bang feature loaded one that met my needs ran $800. When the supplier called me they were going to bring it out to the house and show me how to use it (there's like 3 buttons on it, it's not a complicated device). I asked them which model they were going to give me. The phone grunt didn't know. I asked how much they were going to bill my insurance... again, didn't know. Demanded to speak to a supervisor, eventually found out they were going to charge just north of $2000. I told them to stuff it and bought direct from the online site for like $700.

I had a discussion with an ex-coworker revolving around his situation which is very similar, except it concern hearing aids. He spoke to me at length how several private suppliers for his employer provided insurance plan were quoting him devices with 300% mark-up. His bizarre conclusion, though, was somehow it's Obama who's at fault.

I realized I should have posted this timeline. Part of what comes in next year is an increase in Medicaid preventive care, AND an increase in pay for doctors handling that work (thus, hopefully, bringing more doctors into that area of service.) In 2015, physician pay will be based on outcomes rather than individual services provided.

Robear wrote:

I realized I should have posted this timeline. Part of what comes in next year is an increase in Medicaid preventive care, AND an increase in pay for doctors handling that work (thus, hopefully, bringing more doctors into that area of service.) In 2015, physician pay will be based on outcomes rather than individual services provided.

That's a very nice, informative page there, Robear, thanks! Hey, wait a minute...

IMAGE(http://img33.imageshack.us/img33/7170/healthcarel.png)

Robear wrote:
Oh and the fun part about having Sleep Apnea? Even though I have had zero complications and zero costs since 2007, because I have the condition I have been rejected by every single private insurer I've applied to. 33 years old, 5'10, 210lbs, pretty good health all around... uninsurable.

In 2010, the ACA changed this for people who have not been insured for six months. In 2014, you won't be able to be denied insurance due to pre-existing conditions at all. For what it's worth.

Going 6 months without insurance would court financial ruin. I'm paying for Cobra from my former job.

Here's the funny thing. I left my prior company to go out on my own. I'm an architect/dba/software developer, and I'm VERY good at what I do. I'm making more money with more freedom on my own. However, depending on what happens with the ACA, etc... when my cobra runs out in 12 months I may have to just bite the bullet and go back to corporate life if I can't find insurance. So where are my bootstrappy republican friends on this... my inability to get health insurance is stifling my ability to start my own business and seek success.

/Don't even want full coverage, a 5k deductible HSA would do me just fine.

I don't understand. Why not go with your state insurance exchange? It should be online before then, it's only 6 weeks before the deadline. You won't need to go back to a company to get access to good, decently priced insurance. That's the whole *idea* of the ACA....

And of course, at that time, the pre-existing condition denials go away too.