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Life Health > Running Your Business

Dot's Diner enters a PPACA donut hole

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Small-business owners shared their stories with federal lawmakers Wednesday about the effects on their operations of the Patient Protection and Affordable Care. And they had very different views. 

Some of the business owners, appearing before a Senate Small Business and Entrepreneurship Committee hearing on small businesses’ concerns about PPACA, spoke of hardship; others lauded the landmark legislation.

Witnesses brought in by the Democrats expressed their gratitude to the government for trying to help them pay for health benefits. 

Nancy Clark, who has owned a New Hampshire advertising agency since 1997, was among them. She said she strongly believes in the value of PPACA and in the value of offering employees health benefits.

“I really believe that a healthy workforce is a more productive workforce,” Clark said.

But not everyone agreed.

Another witness, Lawrence Katz, president of Jomar Cafe Inc., a Louisiana company that does business as Dot’s Diner, said his company is suffering serious problems because it has 65 full-time equivalents. 

“We’re caught in this unintended donut hole,” Katz said.

Clark, on the other hand, said she was one of the “96 percent” of Americans who have benefited from PPACA.

Clark said she has taken advantage of the PPACA small-business health insurance purchase tax since it was created three years ago. The credit has averaged about $1,100 per year.

The credit “is not meaningful to a lot of businesses, but it is to me,” Clark said.

This year, premiums actually went down for every single employee, she added.

“For me, that’s a really nice step in the right direction,” she said.

But Katz noted that the PPACA requires companies with more than 50 full-time employees to provide health coverage or else pay penalties, and that the PPACA small-business health insurance tax credit is available only to employers with fewer than 50 employees.

Small restaurant owners can simply send employees to the individual exchanges or use the small-group exchanges without fear of facing PPACA “employer responsibility” penalties, and many large restaurant companies already offer health benefits, Katz said.

But for a company near the 50-FTE limit, the options look bad, Katz said.

If Dot’s Diner continues to do business as is, the least-expensive option may be for the company to pay the penalty to be imposed on “large employers” that fail to offer coverage, Katz said.

Covering the cost of the penalty payments will force the company to increase prices at its diners by about 2 percent to 3 percent, Katz said.

Katz said he also is considering two other strategies.

One would be to sell the company; the other would be to get the company under the 50-FTE limit by selling the company’s two least-profitable restaurants, which employ about 16 people.

Another restaurant executive witness, Kevin Settles, president of Bardenay Restaurant & Distillery in Idaho, said one challenge for his company is that many employees prefer to work 30 hours per week for lifestyle reasons.

But the company can no longer be as flexible about schedules, for fear that some employees may accidentally lose or gain full-time employee status, Settles said.

Sen. Mary Landrieu, D-La., the chair of the committee, said she welcomed the business owners’ testimony about PPACA.

“There are some glitches that need to be fixed,” Landrieu said.

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