ETX restaurant owner sells franchises because of Affordable Care Act
TYLER, TX (KLTV) -
The Affordable Care Act has generated a lot of reaction since it was passed in March 2010 and some of its key components still won't be implemented for more than a year.
But one local business owner, seeing what was coming ahead for his restaurants, decided to sell some of his franchises rather than let employees go or pay a health care penalty.
Bob Westbrook owned three East Texas CiCi's franchises, but he was running into a numbers problem.
He said he was earning about a three percent margin of profit on his businesses - but with 110 employees, nearly 80 percent of whom work at least 30 hours a week, he was going to have to provide health coverage for his employees or pay a penalty when the Affordable Care Act goes into effect in 2014.
"It didn't take but just a second to realize that the profit that we made out of our three stores would not cover the tax or the penalty for non-compliance to the health care act," Westbrook said. "Since the Supreme Court upheld the individual mandate, then it was very clear and simple. It was a business decision. It was strictly a math decision."
And so, as of October 1, Westbrook sold his two Tyler locations. He currently has 22 employees in his Longview location, well below the threshold of 50 or more employees the government will require employers to insure or pay a tax to the government for their health care costs.
Joanna Reagan has been involved in crafting health care legislation over the past three decades in her work on Capitol Hill. She says setting the threshold for employer coverage at 50 or more employees was agreed upon back in the 1990s, and the Obama administration thought it was still a good idea.
"Nobody wants to stifle small business or hurt their ability to compete in the marketplace," Reagan said. "It was very clear they wanted to support small business and to give them the innovative abilities and the economic job creation abilities - that's where most of our jobs come from is from small business people - that they wanted to give them the biggest break they could."
Reagan says offering employers the option to pay the fine instead of providing coverage gives small-business owners a less-expensive way to contribute to the growing costs of health care.
But it was a cost Westbrook says he couldn't manage.
"It was significant," he said. "It was five figures over and above what my profit was to maintain the business."
Westbrook says he and other members of the restaurant industry go to great lengths to make sure their team members have coverage somewhere, whether it be through an individual policy or a safety net already in place, but that his goal is always to provide consumer value at a good price.
"We will always try to find a way to survive and still be here to provide a great value, a great service to our communities that we serve," Westbrook said.
The penalty associated with the Affordable Care Act for employers who have more than 50 employees and do not provide health coverage for them goes into effect in 2014.
Saturday, July 26 2014 2:09 PM EDT2014-07-26 18:09:07 GMT
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