Obamacare, the ‘Free Rider’ Provision & Food Service Employees

Remember when former Speaker of the House Nancy Pelosi – in a moment of surprising candor – said of Obamacare, “We have to pass the bill so you can find out what is in it”?

Well, we’re just 14 days into 2013, and already we’re beginning to find out just how harmful it’s going to be to our economy.  The first victims? Hourly-wage employees at fast-food restaurants.

Within the Affordable Care Act (ACA), Congress approved a “Free Rider” provision that is forcing businesses such as fast-food restaurants to cut hours on “part-time” workers.

Here’s the crux of the problem: The so-called “Free Rider” provision requires businesses with 50 or more full-time employees that do not provide health coverage to pay a $2,000 penalty for every uninsured worker above the threshold of 30 employees.

What’s more, according to the UC Berkeley Labor Center, businesses that do provide health coverage for their workers will need to ensure that the plan covers 60% of medical bills, on average, and costs employees less than 9.5% of their household income. If the businesses fail to meet these standards, they will be fined $3,000 for each employee above the 30-person mark.

As a result of this provision, employers in the food service industry are scrambling to cut the number of “full-time employees” to get under the critical 30-worker threshold.

An e-mail sent by an operator of a Chick-fil-A restaurant in Florida to employees and obtained by CRC summarizes the problem this way: “The implementation of this act is causing me to differentiate between part-time and full-time employees. Because I’m considered a ‘large employer,’, I’ve had to make some difficult decisions.”

The operator wrote that hours would be cut for “part-time” employees in order to prevent them from being classified as full-time employees, which the law defines as employees working 30 hours or more.

Last week Fox News reported that nearly 100 Wendy’s ‘non-management’ employees in Nebraska would have their hours reduced because of Obamacare. This Wendy’s franchise in Nebraska, like the Chick-fil-A in Florida, is among many food service companies that are reducing the hours of hourly-wage workers to sidestep these new regulations.

Congressional Democrats and President Obama have outwardly expressed their pride in this law. They claim it will bring savings for families, equality for the uninsured, and stability to the health care sector.

What is clear right now, though, is that at least some of the people this bill was designed to help are actually being hurt. Many food service employees now have to look for second jobs because their hours are being cut – or worse, they have been let go and now have to look for another job altogether.

Many of these employees could barely afford insurance, if at all, before these cuts and layoffs. Starting in 2014, these same individuals will be required to purchase insurance—private or through the exchange—or face hefty fines.

The Free Rider provision in the ACA is another example of legislation that is both ineffective and harmful to individuals and to businesses.

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