Fast Food Chains Realize Obamacare Will Cost Them Much Less Than They Predicted

By Rebecca Leber, Think Progress

29 March 13

ast food chains have been some of Obamacare's biggest critics, issuing warnings of new surcharges, higher costs, and laid-off workers because of the health reform law. Many of them have now changed their thinking. By the new estimates from several chains - including Wendy's, Popeye's, Jack in the Box, and Chipotle - Obamacare will actually cost about 80 percent less than they originally warned.

Those include companies whose franchises have already taken preemptive action to avoid providing their employees with health coverage, including one Nebraska Wendy's chain.

According to the Wall Street Journal:

Wendy's Co. initially estimated the health-care law would increase the cost of operating each of its 5,800 U.S. restaurants by $25,000 a year. But Chief Financial Officer Steve Hare told an investment conference on March 14 that executives have cut the estimate by 80%, to $5,000 a year, primarily because they expect many employees to decline the insurance offering.

"It is still going to be an additional cost that both the company and our franchisees will have to absorb, but we think it is going to be manageable," Mr. Hare said.

The CEO of Dunkin' Brands Group also softened criticism of the law earlier this month, when he explained to shareholders that Obamacare's costs "are not as high as some people have said" and "we can mitigate those costs very easily."

Company executives say the reason why they exaggerated their estimates is because workers are opting out of the employer-sponsored high-deductible plan that fast food chains typically offer. Those kind of high-deductible plans are popular ways for large companies to lower their profits, but they're not always the best choice for low-wage workers. For instance, many companies that set up high-deductible insurance plans max out at up to $10,000. They can leave low-income workers worse off, because you can spend more than that sum on a single emergency room visit.

Before exaggerating the impacts of health reform, fast food restaurants could have turned to analyses that showed Obamacare would impose only a negligible cost on large businesses, while actually helping small businesses.