How Business Leaders React to the Supreme Court’s Decision to Uphold Obamacare
July 5 2012 by Dale Buss
The Congressional Budget Office has estimated that a fully implemented Obamacare plan will cost the U.S. taxpayer about $1.7 trillion, or double what President Obama said just three years ago that it would cost. In the wake of last week’s decision, small-business groups and CEO members also have weighed in with grave warnings that the plan’s costs will deter them from doing hiring they otherwise would have done.
Investor’s Business Daily argues this comes to a $675 billion tax hike over the next decade. Steve Moore of the Wall Street Journal editorial board cites CBO estimates that roughly 8 million (or 76 percent of) middle-class taxpayers earning less than 120,000 a year will shoulder the new Obamacare tax mandate authorized by Judge Roberts.
Mandated one-size-fits-all health services and insurance will incentivize businesses to pay the fine and push employees into the state’s exchange system. And this will drive up the subsidized entitlement even more.
Entities ranging from the National Restaurant Association to the National Auto Dealers Association to the National Roofing Contractors Association ripped into the decision as soon as it was handed down; restaurateurs alone variously called it “troubling,” “unworkable” and “wrong.”
It’s too soon for the collective job-destruction effects of Obamacare to be accurately forecast, but typical of the response was this warning from Eric Basu, CEO and president of Sentek Global Inc., a San-Diego based provider of security services to the Defense Department.
“Any additional tax on small business owners takes away money they could use to hire more employees,” he wrote in a blog entry for the Washington Post. Obamacare penalties on small companies “will result in hitgher costs to the consumer as well as lower ability to employ people.”
Joel Manby, CEO of Herschend Family Entertainment, worried that the decision created “sort of a zero-sum game.” The head of the Atlanta-based operator of theme parks and other attractions, which employs 14,000 people around the country, 10,000 of them seasonal, added, “There’s only so much cash. And if we’re paying more in taxes, by default we will be investing less in current businesses or to buy new businesses. That means fewer jobs.”
Some CEOs praised the social impulse behind Obamacare and even embraced the necessity for their companies to play some role in patching up America’s ragged health-insurance system. But individually and collectively, business leaders generally reacted with dismay and even angst to the court’s surprise endorsement of the central tenet of Obamacare.
Here’s how the CEOs of four companies of various sizes and in different industries, reacted to the ruling and what it left on their plates:
Manby: He lamented the broad and deep impact that he expects from the decision on Herschend, a $300-million enterprise. “It will be the largest tax increase we’ve ever had, and it will clearly impact our bottom line and our ability to invest,” Manby said.
The pain will come in a variety of ways. First, the costs per se. One likely result will be either ticket-price increases or cuts in some other employee benefits, he said. Second, the financial burdens of Obamacare will spread inexorably to the consumer base on whom Herschend relies for business.
Third, Manby said, there will be “uncertainty in implementation” that “makes planning for the future impossible or, even in the best case, extremely difficult.” And fourth, there already is a drain on management “because instead of spending time in meetings focusing on how to increase guest benefits and experiences at our locations, we’re focusing” on coping with Obamacare, Manby said.
“We literally have 14 different scenarios right now that we must evaluate based on the ruling,” he said.
Larry Elkin, president, Palisades Hudson Financial Group, Scarsdale, N.Y.: Elkin already had eliminated the fully paid health insurance for the company’s 20 employees two years ago, raising everyone’s salary by $250 a month to partially offset his elimination of a benefit that had been worth up to $683 a month. “I expected that down the line the requirements for companies to provide insurance would be applied to smaller companies like ours,” he explained, “and I wanted to be ahead of such a cutoff.”
Elkin believes that this step, combined with the fact that health-insurance coverage isn’t a primary concern of a Palisades workforce that averages in their twenties, inoculated him from the worst direct consequences of Obamacare.
“But I’m firmly convinced this law will encourage adverse selection in insurance,” he said. “People will find it less expensive to pay the tax-penalty for not covering themselves when they’re healthy, and they’ll buy insurance when they’re sick – and insurance companies will have to cover it. The only way not to trigger this insurance-cost spiral is to make the tax penalties keep up with the cost of insurance, as costs rise. And I don’t believe there’s the political stomach to do that.”
Frank Belatti, managing partner, Equicorp Partners, Atlanta: The private equity fund owns 80 franchised Burger King restaurants as well as interests in other quick-serve restaurant chains and retailers such as Jamba Juice and Boot Barn. Though Equicorp already provides health-care benefits to its employees beyond most in its industry, Belatti said, the ruling “is probably going to increase our health-care costs by 10 to 15 percent.”
Among the decision’s effects on his company, Belatti explained, will be the need “to schedule people more judiciously” at the Burger Kings – meaning that management will make new efforts to ensure that part-time employees don’t reach the 30-hour-a-week threshold at which the Obamacare mandate kicks in. That, of course, would make it more difficult for the affected employees to put together a “living wage” for the week.
Still, overall, Belatti, said that he welcomed the ruling because it will “level the playing field a bit” between Equicorp’s fast-food outlets and competitors that offer lesser health insurance or none at all. And, said the Democrat, “We don’t mind paying additional costs if what we’re doing is creating a greater good and a greater benefit.”
Tim Hebert, CEO, Atrion Networking Corp., Warwick, R.I.: He’s “pleased with the decision” because the issue needs to be addressed on the federal level and “if it’s done well, over the next decade the cost of health care could actually be reduced.” Yet Hebert believes Obamacare itself “is a bit ambitious and unwieldy.”
He’s tried to keep the $75-million IT firm, with 200 employees, above the fray in part by providing generous health-insurance benefits to full-time employees and taking on few part-timers. Doctor-visit co-payments are only $10 for Atrion employees; emergency-room co-pays only $20; policy deductibles are very low.
Hebert conceded that a fully implemented Obamacare could “stunt some of the growth of some businesses.” But as a consumer, taxpayer and American citizen, he doesn’t mind. “Businesses have to make adjustments all the time,” he said, “and this is just another adjustment.”