As President Barack Obama prepares to sign a sweeping health care reform bill into law, the foodservice industry faces changes of historic proportion.
In addition to requiring many restaurant operators to contribute to health care coverage for their employees, the newly passed Patient Protection and Affordable Care Act also makes menu labeling the law of the land.
The bill, HR 3590, which is expected to expand health insurance coverage to most Americans by 2014, was passed Sunday night in the U.S. House of Representatives by a narrow margin of 219 to 212. Obama has said he will sign it into law Tuesday.
"The National Restaurant Association opposed the bill that passed the House because it includes provisions that will impose tremendous burdens on America's restaurants and hurt our industry's ability to create and sustain jobs," said Scott DeFife, the NRA's executive vice president of policy and government affairs.
The International Franchise Association also voiced opposition to the measure.
"We support health care reform, but this bill does not reduce the long-term costs of health care and puts more regulatory burden on small businesses," said David French, the IFA's vice president of government relations. "The House-passed bill imposes a costly employer mandate, offers inadequate and unworkable tax credits to subsidize the mandated coverage and hides the true cost with an array of new taxes on small-business owners."
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Certain key details contained within the measure are subject to change if the Senate passes the House-passed budget reconciliation bill, which includes several final revisions to the law. And while Senate Democrats appear confident that they have the votes to shepherd the reconciliation measure through the chamber, observers in the foodservice industry acknowledge that Republican opponents could delay the process.
"It's a very complex process, and there's no guarantee it will pass," said Scott Vinson, vice president of the National Council of Chain Restaurants in Washington.
The NRA said it would continue to press its case before the Senate with respect to provisions affecting the restaurant industry. The IFA also said it would continue to press for a rejection of the reconciliation bill.
"The reconciliation bill further increases taxes on small businesses and includes additional burdensome regulatory hurdles and costs," the IFA's French said. "We urge the Senate to reject the reconciliation bill."
The measure Obama plans to sign would impact businesses with 50 or more full-time employees. The law states that employers would receive a 35-percent tax credit if they helped to insure their employees. However, they would have to pay a fee of $750 per full-time employee if they chose not to insure them.
Under the reconciliation bill, that fee for noninsured employees would rise to $2,000 per worker, although it would not be imposed for the first 30 full-time employees.
The restaurant industry had strenuously urged Congress to exempt part-time and seasonal workers from the mandated employer-provided health insurance coverage. The reconciliation bill, however, requires that businesses calculate part-time workers in a complex formula that very loosely translates two part-time workers into one full-time worker.
On the plus side of the ledger, the reconciliation bill provides for a 90-day waiting period before employers are required to offer workers insurance.
The National Restaurant Association said it had been working with federal lawmakers in an effort to forge legislation that would impact the industry in the least harmful way. In addition to petitioning Congress for the 90-day waiting period and exemption for part-time workers, the association lobbied for a robust small-business exemption, a modification of the definition of part time employees, and maintenance of current regulatory framework that allows large, multi-state employers to offer consistent health benefits to their employees.
Restaurant operators began on Monday to express some frustrations regarding the potential costs of health care reform, especially for small operations.
"With approximately 9 percent to 10 percent of Americans working in the restaurant industry, this is a very important issue that could have serious ramifications," Sam Ballas, president and chief executive of East Coast Wings, a 12-unit casual-dining chicken wing chain based in Winston-Salem, N.C. "Operators could face potential cash flow issues as a result of this legislation and that could end up prohibiting restaurant owners’ access to capital to grow their concepts and, thus, create jobs."
The passage of the health care overhaul bill did present the NRA and other industry associations with one victory in the form of a single national nutrition standard for restaurants. A bipartisan agreement by three U.S. lawmakers last year helped to hammer out a menu-labeling component that was finally added to the health care bills in the House and Senate.
The measure, which pre-empts all existing state and local menu-labeling requirements, also shields operators from frivolous litigation concern over the accuracy of nutrient content disclosure.
According to the agreement, chains with 20 units or more would post calorie counts for standard items on menus and menu boards as well as calories per serving for each item on a buffet and salad bar. Standard menu items must be offered for at least 60 days per calendar year and would not include daily specials, custom orders and test market items on the menu for fewer than 90 days.
In addition, restaurateurs would be required to post a brief statement regarding daily caloric intake and advise guests that additional nutrition information is available. Other nutrition data, which must be available on request, would include calories from fat, total fat, saturated fat, cholesterol, sodium, carbohydrates, sugars, dietary fiber and protein.
The new federal standard will supersede similar measures already approved in California, Maine, Massachusetts, New Jersey, Oregon, Philadelphia, and adozen other localities. However, in New York City, which requires chains with 15 or more outlets to post nutrition data, chains with between 15 and 19 outlets will still be subject to the city’s menu labeling regulations.
"The passage of this provision is a win for consumers and restaurateurs," said Dawn Sweeney, NRA pesident and CEO. "We know the importance of providing consumers with the information they want and need, no matter in which part of the country they are dining. This legislation will replace a growing patchwork of varying state and local regulations with one consistent national standard that helps consumers make choices that are best for themselves and their families."
Not all industry operators supported the measure, however. Following the bill's introduction, 20 foodservice chains had sent a letter to members of Congress urging them to broaden the scope of federal menu-labeling legislation to require more restaurant locations to post nutrition data.
Contact Paul Frumkin at [email protected].
