Franchising Flummoxed by Obamacare

Franchises are flummoxed by the Affordable Care Act. The new healthcare law continues to evolve, leaving a lot of confused small business owners in its wake. Which aspects of the employer mandate are franchisees responsible for complying with? How can they remain solvent without reducing their workforce and losing valuable employees?


The IFA has created to help businesses understand their compliance responsibilities and share testimonials and stories about how they’re dealing with the process.


Regardless of your political inclinations the Affordable Care Act is a big deal. The mandated health care coverage is expensive and small businesses are struggling to maintain profitability– which includes franchises.


According to the IFA, over one-third of full-time franchise jobs could be cut back or lost completely due to the Affordable Care Act. That’s over 3 million jobs. While Obamacare doesn’t take full effect until 2014, owners of fast-food, restaurant and service company franchises are urging Congress to make major changes to the ACA in order to save jobs and keep them in business.


One of the biggest components of the healthcare overhaul that’s causing grief is the discrepancy as to what constitutes a full-time work week. Obamacare says 30 hours; while most in the franchise industry believe 40 hours should be the standard. If Congress doesn’t amend the law franchises will be forced to cut employee hours back to below 30 hours per week.


Franchise business owners aren’t the only ones facing higher costs as a result of the Affordable Care Act. A 2011 Hudson Institute study shows that the franchise industry could see its costs increase $6.4 billion, much of which would be passed on to consumers.

Will Obamacare Benefit Healthcare Franchises?

The majority of the franchise industry disapproves of the Affordable Care and Patient Protection Act. Many franchises have voiced their concerns that the healthcare reforms will cripple the franchising industry’s future growth and discourage franchisees from expanding.


But what about healthcare franchises and senior care franchises? Will they actually benefit from the Affordable Care and Patient Protection Act?


In light of President Obama’s healthcare overhaul the growth of the healthcare industry as a whole is expected to slow. Many Americans live paycheck to paycheck and remain hesitant to spend– even on healthcare.


Despite the anticipated sluggish progress of the healthcare industry, those businesses and franchises associated with or that accept Medicaid or Medicare will benefit in some  way from the Affordable Care and Patient Protection Act:

  • Primary care providers, physicians who serve as a patient’s main source of non-emergency healthcare, are expected to get a 73 percent raise if they are Medicaid doctors. The Congressional Budget Office estimates that Medicaid will gain 7 million new enrollees in 2014.
  • Employers already take 7.65 percent of workers’ wages to support the elderly and disabled, 1.45 percent of which will go toward Medicare hospital bills.
  • Two new Medicare tax increases will fund the senior healthcare program. Those making $200,000 as a single filer (or $250,000 joint filers) will each pay 0.9 percent more for the Medicare hospital tax.


Long term care insurance gives seniors control of their assets and a choice as to how and where they receive senior care services. This insurance covers hospice care, nursing facilities and adult care facilities. Some policies cover health care services, respite care and adult day care services.

Medicare does not pay for all senior care and usually only provides limited coverage for services provided in nursing facilities and home care settings. Assisted living is not covered by Medicare. Medicare will only pay for extended home health care services if a stringent set of conditions is met. The extent of Medicaid’s coverage is limited and similar to that of Medicare.

What Does the Affordable Care Act Mean For Franchising?

Last Thursday, The Supreme Court ruled the Affordable Care Act as constitutional. In the days that have followed, some have rejoiced in victory and others have contested the ruling in anger. However, everyone is asking one salient question, “What does this mean for my future healthcare costs?”


If you’re a small business owner (which includes franchises), you’re probably particularly concerned with the potential added costs of the Affordable Care Act. Do you have to provide healthcare for your employees? If you’re an employee of a small business, you’re probably also concerned. Does this mean that you’ll lose your job? Or, will you be asked to work part-time hours so your employer can opt out of paying for your health insurance?


First of all, here’s a breakdown of what the law requires. For more detailed information, head here.


  • If you own/operate a business that employs 50 workers or less, you will not be required to provide healthcare coverage because you are considered a small business by the Affordable Care Act.*
  • If you own/operate a business that employs more than 50 workers, you will not be required to provide healthcare coverage. However, beginning in 2014, employers that do not provide adequate health insurance will be required to pay an assessment if their employees receive premium tax credits to buy their own insurance. These assessments will offset part of the cost of these tax credits. The assessment for a large employer that does not offer coverage will be $2,000 per full-time employee beyond the company’s first 30 workers.
  • If you are self-employed with no employees, you will be required to purchase health insurance or pay a tax equal to 2.5 percent of your household.


Last Friday, The International Franchise Association conducted a survey of nearly 200 franchise owners, operators and executives. Asked if they’re more or less likely to hire based on how the Supreme Court ruled last Thursday, of the 200 survey participants 85 percent said they would be less likely to hire. Fifteen percent said they would be more likely to hire.


At a separate time but in tandem with the IFA, The Hudson Institute conducted a study that suggests 3.2 million jobs at franchise businesses remain at risk as a result of the employer mandate provision of the healthcare law.

In a recent Washington Post piece, FASTSIGNS chief executive officer, Catherine Monson, called the law “truly unworkable and unaffordable for our country’s small business owners.” Monson lampooned the Affordable Care Act, saying that it is “one of the largest tax hikes in U.S. history,” one that comes at the expense of small businesses, and will ultimately impede growth at a time when our country needs it most.


Just to be clear, the Affordable Care Act isn’t one of the largest tax hikes in U.S. history. Presidents Bush and Reagan both introduced tax increases larger than Obamacare.

That said, the law does include a number of tax hikes:


  • $27 billion : the amount the individual mandate will raise during the next decade.
  • $30 billion: the amount the tax on unusually expensive health insurance plans will raise during the next decade.
  • $60 billion : the tax on insurance companies
  • $200+ billion : the amount the largest tax increase in the law comes from high earners, who will see Medicare payroll tax increase by 0.9 percent


“Bottom line: the law will deter growth by unintentionally discouraging franchisees from owning and operating multiple locations, creating a competitive disadvantage for our franchisees who do own more than one or two locations (and who may want to open additional stores), and barriers to entrepreneurs who are looking to capitalize on the franchise business model to grow their business and hire more workers,” writes Monson.


What do you think about the Affordable Care Act? Is universal healthcare something that the United States needs to embrace? Or, is it a hindrance to job growth?


*If you own/operate a small business that employs 25 workers or less, you will not be required to provide healthcare coverage. However,  the government offers subsidies for small businesses with less than 25 employees who make less than $50,000 annually. A tax credit to defray 35 percent of the cost of healthcare will be given to for-profit companies; a credit of 25 percent to not-for-profits. In 2014, those percentages will rise to 50 percent and 35 percent, respectively.