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National Restaurant Association - Operator testifies before health subcommittee

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Operator testifies before health subcommittee

The restaurant industry is facing challenges in how to comply with the 2010 health care law, a New Hampshire restaurateur testified March 13 during a U.S. House Subcommittee on Health hearing.

The focus of the hearing was to analyze the impact of the Patient Protection and Affordable Care Act on job availability and employer sponsored health coverage.

Tom Boucher, chief executive and owner of Great New Hampshire Restaurants Inc., testified on behalf of the National Restaurant Association. During his testimony, he explained to the subcommittee how the law would affect the industry’s job market as well as workers’ hours and overall compensation.

Boucher said that since the law was enacted in 2010, he and his executive team have been taking steps to understand the requirements of the law and the details of the Federal agencies’ guidance and regulations in order to implement the necessary changes.

“The unique characteristic of our workforce creates compliance challenges for restaurant and foodservice operators,” he noted. “Many of the determinations employers must make to figure out how the law impacts them – for example, the applicable large employer calculation – are much more complicated than for other businesses who have more stable workforces with less turnover. Restaurants are employers of choice for many looking for flexible work hours and so we employ a high proportion of part-time and seasonal employees. We also are an industry of small businesses with more than seven out of 10 eating and drinking establishments being single-unit operators. Much of our workforce are ‘young invincibles’, as 43 percent of employees are under age 26. In addition, the business model of the restaurant industry produces relatively low profit margins of only 4 to 6 percent before taxes, with labor costs being one of the most significant line items for a restaurant.”

Boucher indicated that all of those factors combine to complicate what a restaurant and foodservice operator must consider when implementing changes to comply with the law.

“We have spent an enormous amount of time trying to understand the law and what we must do to comply, but still do not know the answers to many questions,” he said.

He added that until the Jan. 2 publication in the Federal Register of the Treasury Department’s Proposed Rule regarding the Shared Responsibility for Employers provision, employers did not have any firm rules on which they could plan and make business decisions.

“Up until this time,” he said, “proposals and guidance had been issued with numerous opportunities for public comment, but nothing had the weight of regulation. This proposed rule, while not finalized, does provide employers assurances that this rule can be relied upon until finalized by the Treasury Department. Our Association has been educating the industry since enactment and is spreading the word that now is the time to take action to comply. While many rules and guidance have been proposed, which we must implement, questions still remain regarding exact implementation of most of the employer requirements.”

Boucher also noted that it is difficult for operators to know who their full-time employees will be from week to week, thus making it hard to determine which workers would be eligible for health care coverage through his company.
“As a result of the definition in the law, we have changed our threshold and now use 30 hours per week,” he said. … “This is complicated by the fact that sometimes it is difficult to know who the full time employees will be. … It is not easy to predict which hourly staff might work 30 hours a week on average and which will not. I think back to my first days working in our restaurant as a server as an example of how an employee’s hours could be unpredictable from week to week.”

Boucher said he expects that 75 percent of his hourly full-time employees who are eligible today for health insurance coverage through his company but are not taking it, will likely accept it in 2014. That, he said, would increase his health insurance costs some 40 percent, from $500,000 to $700,000.

“With such a large potential increase, you can understand why knowing the impact to the business and our employees is so important,” he told the members of the subcommittee.

He further stated that the impact of the law on the industry could challenge job creation and growth, particularly in a still challenged economy.

“Broader transition relief is needed for employers attempting to comply with the law in good faith as time is short to make the significant changes required by the law,” he said. “The duplicative automatic enrollment provision should be eliminated as it could unnecessarily confuse and financially harm employees. Key definitions in the law must be changed. The law should more accurately reflect the general business practice of 40 hours a week as full-time employment. The applicable large employer determination overreaches to include more small businesses than it should.”

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