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Mary Miller
Associated Press/Photo by Manuel Balce Ceneta
Mary Miller

Cared to death

Money | The costs of Obamacare add up as employers lay off workers and cut back hours

Issue: "2012 Daniels of the Year," Dec. 15, 2012

When Mary Miller, CEO of Cincinnati’s Jancoa Janitorial Services, testified July 10 before the House Committee on Oversight and Government Reform, her message was clear: The federal healthcare law would force her and her husband “to choose between several impossible options in order to remain in business.” The options: either increase premiums for her 320 full-time employees, cease coverage and pay a more than $600,000 penalty, or downgrade workers to part-time status.

So far, the company hasn’t had layoffs and can operate until 2014 without incurring penalties. But other companies, especially larger companies, are taking preemptive steps to avoid the impact of the healthcare law. 

The law requires employers to provide health insurance for employees working more than 30 hours a week. So grocery retailer Kroger, with more than 350,000 employees, said it will limit part-time employees to 28 hours per week. Darden Restaurants—which employs 185,000 people at Red Lobster, Olive Garden, Longhorn Steakhouse, and other chains—said it will experiment with “limiting the hours of some of its workers to avoid health care requirements under the Affordable Care Act.” John Schnatter, founder and CEO of Papa John’s Pizza, said the new law would cost Papa John’s between $5 million and $8 million annually. Customers and employees will bear most of these costs, he said.

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Obamacare doesn’t just hit low-wage retail and fast-food employees. Medical device manufacturers, who typically hire high-wage, technically trained workers, also take a hit from the mandated medical device tax. Welch Allyn, a New York manufacturer of medical diagnostic equipment, announced in September it would lay off 275 employees, or roughly 10 percent of its workforce, over the next three years. The conservative group FreedomWorks said at least 10 medical device companies have announced more than 5,000 job cuts since passage of the Affordable Care Act. Boston Scientific plans 1,200 to 1,400 job cuts, but spokesman Steven Campanini told WORLD the job cuts are “not related to Obamacare. We are going through a re-structuring plan. We’re aligning our business to the markets we serve.” Campanini acknowledged, though, that Boston Scientific has worked to repeal the medical device tax, which he called an “innovation tax.”

And that may be the most significant long-term cost of Obamacare: that it stifles innovation and entrepreneurship. Jancoa’s Mary Miller said her company started a “Dream Manager” program that allowed her mostly low-wage employees to achieve long-term goals such as purchasing a home and starting a business. “Our mantra has been to take the ‘dead-end’ out of ‘dead-end jobs’ and let our employees grow.” Federal healthcare, she said, will likely force her to “put an end to our very successful Dream Manager program. Regrettably, for me and my employees, the new health care law is a ‘dream killer.’”

Layoffs so far attributed to Obamacare

Smith & Nephew: 770

Abbot Labs: 700

Covidien: 595

Kinetic Concepts: 427

St. Jude Medical: 300

Hill Rom: 200

Stryker: 1,170

Murray Energy: 160

Companies that will reduce worker hours below Obamacare’s 30-hour threshold

Darden Restaurants: 185,000 employees

Kroger: 350,000 employees

Papa John’s: 16,000 employees

Sources: FreedomWorks and media accounts

Warren Cole Smith
Warren Cole Smith

Warren, who lives in Charlotte, N.C., is vice president of WORLD News Group and the host of the radio program Listening In. Follow Warren on Twitter @WarrenColeSmith.

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