Supreme Court health care ruling meets criticism from restaurant industry

Members of the foodservice industry expressed deep disappointment and concern after the U.S. Supreme Court announced its decision on Thursday to uphold President Barack Obama’s highly controversial health care law.

In a narrow 5-4 ruling, Supreme Court judges upheld the constitutionality of the central element of the president’s sweeping Patient Protection and Affordable Care Act, the individual mandate, which requires that all Americans purchase health insurance.

The court’s historic decision is expected to alter the way Americans receive and pay for their medical care.

Industry associations and many restaurant operators have been arguing for the past several years that added costs associated with the law could cut into earnings, force operators to raise prices, eliminate jobs and put the brakes on growth in this already economically challenged environment.

The court’s decision was frustrating for many in the industry.

“Today’s ruling by the Supreme Court is troubling for restaurant operators and business owners across the country,” said Dawn Sweeney, president and chief executive of the National Restaurant Association, in a statement. “We encourage Congress to continue efforts to repeal the law, since the Court’s decision leaves the employer requirements in place, provisions which impact restaurant operators’ ability to grow and create jobs.”

Steve Caldeira, president and chief executive of the International Franchise Association, said the IFA was “deeply disappointed by the high court ruling to uphold the Affordable Care Act, which places undue burdens on the franchise small business community. While it may have been ruled constitutional, the law is unworkable, unaffordable and wrong for our country’s small business owners.”

The Court had listened to three days of arguments in March on the law. The measure was passed by congressional Democrats despite Republican opposition in 2010.

Operators say many elements of the current law have yet to be hammered out and remain unclear to them. “Just because something is found to be legal, that doesn’t necessarily mean that something should be done,” said Jamie Richardson, vice president of government and shareholder relations for White Castle.

“The challenge is going to be understanding how we do it as it has been legislated,” he continued. “The biggest thing still is the uncertainty about how the rules are going to be written. It needs to be made actionable in the real world in a way that doesn’t cripple businesses.”

According to the law, operators with 50 or more full-time equivalent employees are required to offer “affordable” health insurance of minimum value to full-time workers and dependents or pay a penalty. The minimum penalty is $2,000 per employee.

Employers must begin offering health care insurance to their full-time employees in 2014.

“The [Affordable Care Act] imposes heavy mandates on employers using punitive penalties for noncompliance,” said Rob Green, executive director of the National Council of Chain Restaurants. “The law will particularly damage the chain restaurant industry, which operates on thin margins and cannot support costly government-imposed mandates. Many chains have indicated they will have no choice but to cut back on workers’ hours or close restaurants in order to avoid penalties.”

Prior to the court’s ruling today, Steve Carley, chief executive of Red Robin Gourmet Burgers, had voiced his unease about the law in an interview with Nation’s Restaurant News. “Personally, I haven’t seen a competitor yet who has put in the long-term forecast for the financial implications of Obamacare,” Carley said. “They are significant and they are dramatic. So much so, that no one has put in the long-term forecast yet, including us."

Carley said he favored “a more bipartisan conversation so we can get more common-sense solutions that we can all address.”

Many within the industry warn that the enactment of health care reform as it stands would severely hamper the industry’s fragile growth. “When you couple these new expenses with the lack of growth capital and uncertainty about taxes, this is certainly not a recipe for growth,” Caldeira said.

In the meantime, many are calling for Congress to revisit the law. “This unworkable law cannot stand as is,” the NRA's Sweeney said. “We need reform that addresses the increasing costs our members are faced with each year. …We ask members of Congress to take action that helps the restaurant industry continue to help create jobs and grow the national economy.”

Veteran foodservice executive and current candidate for the sixth congressional district in Florida Craig Miller said the decision amounts to “the biggest tax increase in American history,” and said if elected to the U.S. House of Representatives, he would “sponsor legislation on my first day of Congress to overturn this erosion of our Constitutional rights.”

The House of Representatives is expected to take up a bill calling for the full repeal of the law the week of July 9.

Editor's note: This article was changed to remove a statement that was rescinded by the Profit Per Employee Coalition and Bloomin’ Brands Inc.

Contact Paul Frumkin at [email protected].