Wednesday, September 3, 2014
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Health care reform hitting some diners' bottom lines

By January 2016, small businesses with 50 to 99 employees will have to cover 95 percent of their full-time employees with health insurance or pay a fine, under the Affordable Care Act.
By January 2016, small businesses with 50 to 99 employees will have to cover 95 percent of their full-time employees with health insurance or pay a fine, under the Affordable Care Act. PA Independent photo

A French restaurant in Los Angeles and a chain of casual eateries in Florida have stirred yet another tempest in the Affordable Care Act teapot by adding health care surcharges to customers' bills.

Proprietors of both restaurants have levied 1 percent to 3 percent fees to ready themselves for new health care costs on the horizon. By January 2016, small businesses with 50 to 99 employees will have to cover 95 percent of their full-time employees with health insurance or pay a fine, under the Affordable Care Act. Businesses of that size were expected to comply this year until the mandate was delayed.

Republique in Los Angeles has added a 3 percent fee it calls "Surcharge Healthy LA." Not long after, eight locations of Gator's Dockside in central Florida followed suit with a 1 percent "ACA" fee.

The fees have drawn a lot of attention, good and bad, through social media and now have the attention of other restaurateurs.

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  • Some eateries would be reluctant to pass on such a fee to diners, said Russ Bendel Jr., president of the Orange County chapter of the California Restaurant Association.

    "I do think on a personal level it might be a little tacky," said Bendel, who owns the Vine in San Clemente, Calif. "I personally wouldn't want to put that on a check and leave that impression on a guest."

    One Republique customer on the review website Yelp agreed in a Jan. 21 post on her dining experience.

    "Something about this strikes me as tacky," said Lisa T. of Los Angeles. "Sure, I could take this 3 percent out of my 20 percent tip, but why put me in that position to begin with? A bit silly for such an otherwise upscale experience."

    Passing the added health care costs on to customers is a necessity for some operations, whether or not it shows up on the bill as a surcharge.

    Orange County, Calif., restaurant operator Mario Marovic says the Affordable Care Act is another government mandate that erodes razor-thin profits in an industry facing a slow post-recession recovery and rising commodity costs.

    "There's going to have to be some inflationary (costs) whether it is a line item on the receipt or built into the ticket price," he said.

    For now, however, Marovic doesn't plan to pass those costs to his customers at the seven restaurants and watering holes he owns.

    "My take is we're not going to do it," he said of any immediate surcharge. "I really do feel for both restaurant owners, as well as customers. Everyone is really the loser here."

    Joe Manzella, who operates Taps Fish House & Brewery in Brea and Corona, Calif., and The Catch in Anaheim, Calif., said ACA and minimum wage combined will cost him nearly $1 million more per year. When the mandate kicks in next January for his restaurants, Manzella said he will seriously consider a surcharge of at least 1 percent or 2 percent.

    "This is a major frontal assault on your ability to run your business," he said. "It's not something we love to do. I have to figure a way to survive and grow my business."

    The passing off of costs is a "food chain" domino effect that goes from suppliers to restaurants to diners, he said. "You are either going to know about (increases) by a 1 or 2 percent (surcharge,) or your filet goes up," he said. "And I'm talking – it goes up, not just 50 cents."

    The latest fees recall memories of a similar effort launched by San Francisco restaurants in response to a city program aimed at bringing subsidized medical care to the uninsured. The city attorney's office found that a sizable portion of the money collected was not being spent on employee health expenses, sparking a crackdown.

    That's not to say surcharges have completely disappeared from San Francisco, said Scott Hauge, president of Small Business California. Restaurants there are still tacking on fees, but they're now pointing to the general higher cost of doing business as the reason.

    "Nobody is saying Obamacare," Hauge said. "The Obamacare (surcharge) is the next generation."

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    Lily Leung and Nancy Luna The Orange County Register (MCT)
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