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Cost of Health Plan Will Force Employers to Cut Employees

By Ruth Marcus
The Washington Post

Herman Cain, the chief executive officer of the Godfather's pizza chain, was adamant. "For many, many businesses like mine the cost of your plan is simply a cost that will cause us to eliminate jobs," he said. President Clinton was equally adamant. The increased costs, he argued, wouldn't be so large, and the chain could just increase its prices by a little bit to make up for them. "I'm a satisfied customer," Clinton said. "I'd keep buying from you."

To end the lengthy exchange, which took place during a town hall meeting in Kansas City, Mo. last week, the president finally just asked Cain to send him the figures at the White House. Cain got the data from his accountants and did so this week.

Their analysis shows the Clinton plan would nearly quadruple Godfather's health care costs, but would also vastly expand health care coverage, from a small slice of Cain's 3,400-worker chain to a sizeable majority.

Cain's analysis offers a real-world example of the effects of the Clinton plan on restaurant chains. Restaurants are likely to be particularly affected by the requirement that employers pay a share of health insurance for their workers. They rely heavily on part-time workers, and generally do not pay their health insurance.

But while most restaurants are small businesses eligible for subsidies, Godfather Pizza -- which was reported to have $250 million in sales last year -- is too big to qualify.

In a sense, Cain's company is an example of a worst-case scenario under the Clinton plan for health reform.

Clinton's plan would expand the universe of employees eligible for health insurance paid in large part -- 80 percent, under the administration plan -- by Godfather's.

Godfather's would have to pay for all the full-time workers except a few full-time college students. Of the 2,400 part-time workers, Godfather's would be excused from paying for nearly half -- those who work fewer than 10 hours weekly or are otherwise excluded under the Clinton plan. But that still leaves 960 full-time and nearly 1,300 part-time workers who would be entitled to coverage.

"I wish we could cover this group of workers but the incremental cost under your plan causes a significant negative impact on our bottom line which cannot be easily rectified," he told the president in a letter this week.

Responding to Cain on Clinton's behalf, Small Business Administrator Erskine Bowles said that other businesses and taxpayers are now forced to shoulder the burden of health care costs for Godfather's uninsured workers.

"By asking all employers to share responsibility, the president's plan levels the playing field," he said. "For the first time, all businesses will be able to negotiate the rates that America's largest companies do today. In addition, all of your competitors will have the same responsibilities that you will."