Restaurants Get A Health Care Reprieve


Restaurants can breathe a little easier now. The Obama administration’s decision yesterday to delay enforcement of employer penalties until 2015 gives the industry a one-year reprieve to figure out how they’re going to comply with the rules. But the delay’s ultimate impact will likely be modest at best.

The delay “will allow us to consider ways to simplify the new reporting requirements consistent with the law,” wrote Mark Mazur, assistant secretary for tax policy at the U.S. Treasury Department, in a blog post on the government’s web site. He added that it would provide time to adapt coverage and reporting systems while employers work to make coverage affordable.

The National Restaurant Association praised the move, calling it “transition relief.” The association’s CEO, Dawn Sweeney, said that, “the administration has listened to the National Restaurant Association about the concerns of our members, the complexity of the requirements and the need for additional time to be able to comply effectively.”

The Affordable Care Act will impact restaurants as much as any other industry, because eateries rely on part-time, low-wage workers. Employers will have to provide them with affordable health coverage, and those workers will have to buy coverage, or face penalties. Without the employer penalty, at least for one year, restaurants can in theory rest easily next year and take the time to determine what they should do.

But restaurants shouldn’t get that excited, nor should they stop preparing for the law. The employee mandate remains in place—meaning the law will still go into effect. Thus, the impact of the delay is “likely to be minimal,” Goldman Sachs analyst Michael Kelter said in a note this morning. “We do not believe this delay will meaningfully change the ultimate impact of the legislation …”

The law wasn’t likely to have a big impact because we don’t think employees were likely to opt for coverage initially. The penalty on workers who don’t get coverage next year is minimal, and so low-wage workers seem likely to choose the tax penalty rather than opt for the high cost of health insurance. Of course, that penalty increases to $325 in 2015 and to $695 by 2016. The upshot: when restaurant owners do face an Affordable Care Act penalty, more workers will be opting for coverage.

In other words: they’re getting a reprieve, but they likely had a reprieve, anyway.

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