HEALTH CARE

The Real Problem You Have With Obamacare

Businesses across the country are worried they're going to be forced to insure their workers. But the real problem has nothing to do with healthcare.
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Here's a story about restaurants and Obamacare, only it's not about restaurants and not about health insurance. It's ultimately about something facing every business owner: the need to raise prices--and what happens when you feel like you can't charge enough cover the costs of doing business.

The Problem

Restaurant owners are reportedly negative toward the Affordable Care Act, the official name of the legislation commonly referred to as Obamacare. The problem they see is the 30-hour rule that says employees working 30 hours or more in a company with at least 50 employees are covered by the health care mandate, as Bloomberg Businessweek reports:

Restaurant owners face two choices: If their businesses are profitable, they could dig into margins to cover the cost of insuring additional workers, thus curbing growth; or the owners could simply cut workers' hours to stay away from the 30-hour threshold as much as possible. Some 16 percent of restaurant workers are at risk of reduced hours, according to estimates from the University of California at Berkeley's Center for Labor Research and Education.

What's a Business to Do?

Some chains like Firehouse Subs don't plan to cut hours, but expect that the financial impact will slow expansion beyond the current 660 franchised and company-owned restaurants. Others like Papa John's took heat for its CEO John Schnatter saying that it might add 14 cents to the costs of pizzas and that some franchise owners might cut hours to keep more people below the 30-hour limit. Schnatter claims that his words were taken out of the context of saying that 100 percent healthcare coverage was "good news." Even if he didn't add that part, he only voiced what many were thinking.

Here's where things move beyond restaurants and health insurance. Many companies run into conditions and events that translate into greater expenses. And many CEOs and owners are very concerned about raising prices.

On the surface, it's not hard to see why. The economy is still stumbling along and the real annual household income adjusted for inflation has been at best stagnant for decades now. (In some areas, like fast food, already low wages have been decreasing, when adjusted for inflation, since at least 2009.) Competition is fierce and globalization brings more of it. Big distributors demand ever lower prices.

And yet, you can't run a business from a position of fear. Be informed by fear, sure. But when you become paralyzed and can't take steps that you must, like raising prices when necessary, your company is in deep trouble. You cut hours or pay or benefits to workers, which makes them more likely to leave or to work in complete dissatisfaction and resentment. You skimp on ingredients or components. Maybe you start nickel-and-diming customers, adding in extra fees or cutting back on what you deliver.

These are tactics to undermine the long-term success of a business. If you deliver real value to customers, they'll understand and recognize that they can't get something for nothing. If you don't, then taking shortcuts won't ultimately help.

IMAGE: Roberto Muñoz/Getty
Last updated: Sep 25, 2013

ERIK SHERMAN | Columnist

Erik Sherman's work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, and Fortune. He also blogs for CBS MoneyWatch.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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