BUSINESS

Fast Food Industry's Obamacare Fears Ignore Two Likely Scenarios

05/15/2013 12:21 pm ET
AP

Fast food chains and franchises across the country have voiced concerns about Obamacare's business consequences in recent months. But the health care law may not be quite the burden many think.

That’s because many young and healthy fast food employees may end up opting out of the insurance Obamacare requires companies with more than 50 workers to provide to full-time employees, according to a recent Barclays analyst's note.

The note cites two main reasons employees may opt out. One is that some may prefer paying a penalty (one that isn't such a huge percent of their wages) over paying for health insurance. The other is that workers under 26 years old -- a designation 40 percent of the industry's employees fit -- may just choose to simply lean on mom: Obamacare raises the age people can stay on their parents’ insurance plans to 26.

As a result of these and other factors, many restaurant chains now expect the cost of Obamacare to be less than previous estimates, according to the note. Dunkin' Donuts officials said they expect to be able to manage the cost of the program "very easily." Wendy's similarly expects the cost of health care reform to be about $5,000 per restaurant, or "significantly lower than our original estimate," according to statements cited in the note.

The findings come after fast food executives, including the CEO of the aforementioned Dunkin’ Donuts, expressed concern that Obamacare would push restaurants to hire more part-time workers so that they wouldn't have to cover them, or pay a fine for dropping workers from their health care plans.

Darden Restaurants, the parent company of Red Lobster and Olive Garden, hired more part-time workers last year in a test aimed at limiting health care costs. Darden ultimately backed off the plan after it was met with backlash.

Franchises of other restaurants, including Taco Bell and Wendy’s, have gone even further, reducing the hours of many of their workers in response to the new law.

The Barclays note isn’t the first to point out that concerns employers’ reactions to Obamacare will hurt workers may be overblown. Nearly 90 percent of employers said they don’t plan to shift full-time workers to part-time status as a result of the law, according to a March survey from the Minneapolis Federal Reserve. In addition, an April survey of benefit professionals found that nearly 70 percent of their companies plan to continue to offer coverage to full-time employees next year when many of the provisions of Obamacare take effect.

Also on HuffPost:

Obamacare Haters
Suggest a correction
140 Comments

CONVERSATIONS