Obamacare isn’t such a bad deal for Papa John’s after all

To borrow a metaphor, if the numerous scary myths about the Affordable Care Act were candies and nuts, every day would be Christmas.

One such myth is that the ACA is a terrible deal for outfits like Papa John’s Pizza.

Ezra Klein rebuts that notion HERE:

In 1974, President Richard Nixon’s health-care plan proposed forcing employers to pay 75 percent of the cost of basic health insurance for their employees, though there would be some assistance for smaller businesses. In 1994, President Bill Clinton proposed forcing employers to pay 80 percent of the cost of basic heath insurance for their employees, though a somewhat confusing series of caps meant that smaller businesses would end up paying much less.

In other words, both Democratic and Republican presidents used to think the proper role for business in the American health-care system was to pay most of the cost of their employee’s health-care insurance.

Under the Affordable Care Act, the principle is different, and much less onerous: Employers don’t need to offer health care, and they don’t need to pay for most of the cost of their employee’s health care, but if their employees are taking advantage of public subsidies, then the employer should have to pay a penalty equal to about 1/8th the cost of the average employer-provided health insurance plan.

Some employers are still unhappy, and understandably so. The Affordable Care Act will impose new costs on them. Papa John’s, which doesn’t provide most of its employees with health insurance, is warning that it might have to raise prices on its pizza by 11 to 14 cents per pie to offset the penalties.

That might seem laughable, but it’s a legitimate reason for Papa John’s to dislike the bill. Businesses try to cut costs. One way they do that is by skimping on employee pay and benefits. The Affordable Care Act, at least in the short-term, will raise costs on businesses that have pursued that particular cost-cutting strategy. 

As Slate’s Matt Yglesias has noted, that makes the Affordable Care Act an intervention on a particularly worrying change in the economy. In recent years, corporate profits, measured as a percentage of the U.S. economy have been hitting record highs, even as the share of those profits that go to workers have hit record lows.

The health-reform law won’t reverse that trend, but for the businesses that are doing the most to drive it — the ones that have cut costs and boosted profits by paying their workers very little and refusing to offer them decent health insurance — the Affordable Care Act will force them to contribute a bit more toward their workers’ health care or raise their prices. And if they choose the latter route, then fine: It levels the playing field between them and their competitors who haven’t taken a low-road approach to paying their workers. That gives pizza companies that do pay their employees well a slightly better position in the marketplace than they have today.

That won’t make Papa John’s feel better, and it shouldn’t. The Affordable Care Act isn’t helpful to their business strategy. Rather, it’s helpful to the business strategies of companies that have sought success by paying their workers good wages, giving them reasonable benefits, and delivering a higher quality product. Which should make us feel better.

Still, Papa John’s can comfort itself with the knowledge that it is not being asked to do nearly as much as Presidents Clinton or Nixon wanted it to do. It doesn’t have to give its employees health care or pay them well. It just has to pay a small fraction of the cost that the public will pay to insure its employees. It’s not as good of a deal as the status quo, but it’s a better deal than it could have expected, or than it probably deserved.

UPDATE: Meanwhile, the Denny’s restaurant chain is trying to deal with its own PUBLIC RELATIONS PROBLEM regarding the Obamacare.



  1. Punching you in the gut doesn’t feel so bad if you just realize that I could have punched you in the face.

  2. Luke Fredrickson

    The American people have spoken on this issue. Repeatedly. So has the Supreme Court. So did the Heritage Foundation. So did Mitt Romney. There is an important role for the American government to play in regulating health care for the benefit of the public as a whole. Laissez-faire does not work for health care.

    Patriotic Americans and their God-loving, decisively (twice!) elected President have spoken loudly for progress in health care policy. Like it or lump it.

  3. If it is the employers’ right to cut costs and wages as much as they can, then it is the employees’ right to try to get the highest wage and benefits possible. They both have the right to use the government to accomplish their aims.

    Either they both can do it or neither one should be able to.

  4. So Luke,

    You are saying what exactly?

    That I am not patriotic or God-loving? I am sure that’s not it.

    That by pointing out the inadequacies of the ACA I am unpatriotic or not God-loving? That can’t be right either. After all even those who were for it and passed don’t even know what is in it or what the outcome will be.

    Make no mistake, the health care industry in this country (at least anyone in the industry with a clue) is well down the road of preparing for the ACA. You just may not like the preparations or the final outcome.

    Hospitals, insurance companies and physicians (those who are not going to get out of the business) will lump it. The question is, will patients like it?

  5. Luke – Laissez-faire does work for health care.

    In the first debate Obama pointed out the success of the Cleveland Clinic. It developed its cost-controlling policies on its own without government intervention, and yet it also provides top-notch patient care.

    In order for hospitals to remain competitive in the free market, they can look at the Cleveland Clinic as a model so they people everywhere can enjoy the same benefits. Interjecting government only increases bureaucracy where its not needed, and thus it requires higher taxes.

  6. I agree Jerry. But how does that benefit the workers if they lose their jobs or the company they work for closes?

    Pro-government intervention types are always surprised at the unintended consequences of their interventions.

  7. Luke Fredrickson

    So Nef, why are per capita health care costs so much higher in the relatively Laissez-faire environment in the U.S. when compared with the rest of the industrialized world?

    And are you saying that struggling hospitals such as expdoc’s only need a better management model to succeed? Laughable. Eating the costs for under-insured patients is the obvious problem, not forcing a Cleveland Clinic model on a rural hospital with a completely different customer base.

    And if you don’t believe me, ask the conservative Heritage Foundation why the principles of the ACA will drive down costs and improve individual (not government) accountability for efficient use of health care. It was their idea.

  8. Brian Opsahl

    Fact is that our Health Care costs have gone through the roof over the last 20 years and if nothing was done (8 years Bush had his chance) those double digit raises will banrupt ALL of us. The President is smart enough to figure out how to try and get hold of these costs and put us on a path where all are covered and pay a fair share instead of how it works now where we pay for free emergency room visits. Thanks to the republican leaning Supreame Court we have this. Jonh Roberts was smart enough to see how important it was…!!

  9. In the last 20-30 years what changed?
    I could pay for a baby and had no insurance, Swedes allowed me to pay each month. I had a crappy job and worked 55 hours a week.

    Yea, we will all be covered and have limited access to medical care. A British utopia!, Now what about dental?

  10. Brian Opsahl

    Today without insurance….that baby would cost you about $ 25,000 thousand dollars …so really you will be making payments the rest of your life..knee surgery cost like $ 40,000 without insurance you will be broke the rest of your life.

  11. Yea Brian, I asked what changed. (hint may start with a G)

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