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It's Come to This: Obamacare Threatens White Castle

12:07 PM, Jul 6, 2010 • By MARY KATHARINE HAM
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Well, I guess now we know why Kal Penn left the administration. It wasn't because he suddenly realized he'd given up a plum regular role on a top-rated network TV show for a wholly unfulfilling career as a flack for Obama administration policies, which— let's face it— didn't give him nearly the energizing jolt of moral superiority that hanging Shepard Fairey posters did.

Nope, he left because the man whose career was launched by a fast-food slider chain could not countenance the War on White Castle. And, who can blame him?

The White Castle hamburger chain fears that a health insurance reform law adopted earlier this year will put its profits on a downward slide.

The Columbus-based family owned restaurant chain - known for serving small square hamburgers called "sliders" – says a single provision in the bill will eat up roughly 55 percent of its yearly net income after 2014.

Starting that year, the bill levies a $3,000-per-employee penalty on companies whose workers pay more than 9.5 percent of household income in premiums for company-provided insurance.

White Castle, which currently provides insurance to all of its full-time workers and picks up 70 to 89 percent of their premium costs, believes it will likely end up paying those penalties. The financial hit will make it hard for the company to maintain its 421 restaurants, let alone create new jobs, says company spokesman Jamie Richardson. White Castle employs more than 10,000 people nationwide, and more than 1,200 in Ohio.

IHOP will not be spared, either:

George Ebinger of New Jersey, who owns several International House of Pancakes restaurants, says the penalties for not insuring his 140 workers will cost roughly half as much as insuring them. He figures he will have to raise prices and possibly lay off workers to come up with the $220,000 he anticipates the penalties will cost.

Could this be an attack orchestrated by lobbyists for Big Krystal? Or, is health care just a proxy front in Michelle Obama's war on fatties?

This article is just one of a thousand glimpses the post-Obamacare era has given us at the real costs of the plan we had to pass to "find out" what was in it.

The International Franchise Association opposed the law, saying, "Our message all along was to start over," and calling the bill "damaging to small businesses." The National Restaurant Association opposed the bill because it will, "impose tremendous burdens on America's restaurants and hurt our industry's ability to create and sustain jobs."

White House spokeswoman Nancy Ann DeParle characterized such concerns as a bunch of cranky big businessmen whining about their profit margins ("I understand that they don't like it and believe it will cut into their profits, but it is a relatively small contribution to defray costs to taxpayers."), but National Restaurant News painted a different picture in its April coverage of the health care battle, featuring many personal stories that were far more Main St. than Wall St.

“I voiced concerns about the effect health care reform might have on our margins,” said Willis, owner of Ruby’s Diner on the Square and two Beth Marie’s Old Fashioned Ice Cream and Soda Fountains in Denton. “Most restaurants are run on very slim profit margins these days, and the costs [associated with mandated health care] could definitely hurt us.”

Another reason some restauranteurs worried about the health care bill is that menu labeling mandates can be onerous. I would submit that this has more to do with their desire to stay in business than their alleged evil, greasy desire to fatten the American people. Adding new menu boards, drive-through menus, a menus is an expensive prospect, especially when even advocates of menu labeling can point to no evidence that it actually works.White Castle has been offering health care to its employees since 1924. It pays 70-90 percent of health-care costs for those employees. The company cannot be considered one of the health-care system's bad actors, even by the most ludicrous lefty's standards. But when good behavior is punished, you will not get more of it. Now, the company says it will consider dropping employee-based coverage and putting employees in federal exchanges— a scenario which, before Obamacare passed, was considered a paranoid right-wing talking point.

"It would be incongruent with how we run our business, but we have to think that through," says Richardson. "No matter what, we will do what's best for our team members."

People and businesses act on incentives, and Congress has little to no idea what it incentivized when it passed this bill. That's pretty risky business in a bad economy, even if the law affected only the restaurant industry, which employs 10-12 percent of Americans in some fashion.  Instead, this bill affects far more than that in a thousand ways we don't yet know. In the spirit of Nancy Pelosi's legislative philisophy, I guess we'll just keep "finding out," now that it's passed.In other Kal Penn news (yes, I'm as surprised as you that there's more), he's in a pretty good fight with Joel Stein of Time Magazine. Update: Apologies to my own colleague, Jonathan V. Last, who wrote up a similar item in May. I missed it while I was in Iraq. Though the local news coverage of the White Castle dilemma is new, the CEO's original comments were from this spring. Nonetheless, the many Kal Penn news junkies in our audience will no doubt be pleased with the depth of our coverage.

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