The Last Word: ‘Papa John,’ Can You Spare a Dime for Health Care?

Say what you will about the hype surrounding “Papa John” Schnatter’s claim that health care reform will force him to hike the cost of a pizza by more than a dime.

Whether or not you like his pies, it appears he’s right. And though the full financial effects are still hazy, research suggests health care reform will increase costs for most firms.

In early August, Schnatter, the international pizza chain’s CEO and TV pitchman, told shareholders, “Our best estimate is that Obamacare will cost 11 to 14 cents per pizza” once health care reform fully takes hold in 2014. Obamacare, of course, is the term often used when referring to the Patient Protection and Affordable Care Act of 2010, which was upheld with the U.S. Supreme Court’s 5-4 verdict earlier this summer.

The company’s strategy, Schnatter added, would be to pass the cost onto consumers to protect the best interests of its shareholders. The current nationwide drought and spiking gas prices are cost-boosting justifications for price hikes that we’ve heard before. But this is the first time since the ruling that a big company has publicly cried cause-and-effect regarding health care reform on its operations and profits.

Politics apparently has joined the menu — at least through November — alongside carmelized onions and fennel as new pizza toppings. Schnatter, a well-known conservative who has hosted fundraisers for Republican presidential nominee Mitt Romney, is taking dead aim at President Barack Obama’s health care reform plan. Yet, whatever the political ploy, Schnatter’s proposed price hike is baked in fact.

The day before Schnatter’s pie-pricing plan was announced, consultancy Mercer released a study that retailers and hospitality employers are facing big cost increases in 2014 because of health care reform. Companies in those particular industries — Papa John’s falls somewhere between — rely on low wages and high volume to prop up profit margins.

More importantly though, companies like Papa John’s will be compelled to change their health plans come New Year’s Day 2014.

According to Mercer’s survey of 1,203 retail and hospitality industry employers, 46 percent said they’ll have to upgrade their plans to meet federal standards extending coverage to employees working at least 30 hours a week. Employers that choose not to offer qualified coverage will be charged $2,000 per full-time employee — those working at least 30 hours a week — starting in 2014.

That would be in the neighborhood of a 3 percent hike in health care cost increases because of the law’s requirements, the Mercer study notes.

While hospitality companies and retailers may be grumbling about the future under their breath, there’s probably a silent cheer among them for Papa John’s defiant stand. Since offshoring pizzas are an unlikely option, Papa John’s will have to pony up one way or another. If Schnatter follows through with his vow to hike a $7.99 pie to $8.12, then so will you, pizza-eater.

But then again, there could be alternatives. And I’m not talking about a GOP win in November. If health care reform has accomplished nothing else, it puts one of business’ biggest, fattest elephants square in the middle of the room. How will you manage health care for your employees?

Several recent studies validate that the vast majority of employers will continue to offer employee health care beyond 2014. Simply put, employer-provided health care is entrenched in the American way of doing business. What that looks like and who pays what portion remains to be seen.

This is where Schnatter and other employers — retail, hospitality or otherwise — can play a crucial role in shaping a truly vital employee benefit.

The September issue of Workforce Management explores several health care delivery methods with the potential to curb employer costs and still provide quality coverage. Some, like value-based insurance design and direct primary care, could be the wave of the future. Workplace clinics, which have existed for decades, are undergoing a huge renovation.

If politics is Papa John’s newest pizza ingredient, then working to provide better health care should be baked into the recipe.

Rick Bell is Workforce’s managing editor. Comment below or email editors@workforce.com.

Workforce Management, September 2012, p. 34 — Subscribe Now!