Willing but wary on health-care reform

The California Restaurant Association is a major force in the California health-care debate. For starters, the CRA represents the largest private-employment sector in the state–over 87,000 restaurants and 1.4 million employees. The association also has been willing to put its considerable political weight–and its checkbook–on the line to protect its members. That’s what happened in 2004, when the CRA spent millions to stop Proposition 72, which would have required California employers to provide health care to workers. We talked with CRA President Jot Condie about the current crop of health-care proposals.

[B]Your big bone of contention is with the employer mandate components of the health-care proposals on the table.[/B]

We are an industry that is the point of entry for a lot of people in the workforce. There are a lot of entry-level wages, and it’s a low profit margin industry. You have a labor-intensive industry where 35 percent, on average, of the budget of a restaurant is in labor dollars. And you have a profit margin that is between 3 and 5 percent. You’re talking about very thin margins. When you start carving into the profit margin of an industry, that’s where the challenge comes in. It’s not that restaurants or restaurateurs don’t want to offer health care to their employees. It’s that they can’t. That’s rooted in the thin profit margins, and in the double-digit increases in premiums that have gone unabated for years.

We’re talking about a 4-percent fee or tax, or whatever you want to call it. That’s only a hit assuming you’re not already providing some sort of coverage.
There’s a lot of discussion amongst various leaders in the business sector who are saying 4 percent isn’t enough. To us, that’s almost an indictment of the cost of health care. If an employer is paying 8 percent or 10 percent, that’s too much. If you’re talking about paying 10 percent of payroll on health-care costs, that is an indictment on the health-care system in California, and nationwide frankly.

[B]So, what do you do about that?[/B]

We’re in the industry of providing food to the public. We’re ham and eggers. If you get the nuances of health-care policy, you’ve gone beyond our ability to–well, the answers aren’t simple.

[B]You say, “we’re ham and eggers.” That belies how sophisticated CRA is. You must have some idea or policy proposal.[/B]

Clearly there are cost drivers. Every time a new therapy or type of care comes along, that drives up the costs. We represent a workforce that is roughly 18 to 35 years old. In the medical community they are the so-called “invincibles.” They are the people who feel like they don’t need health care. They don’t want to buy it. Well over 60 percent of our industry offers health care to the employees. A lot of those employees refuse to accept it. They may want it, but when they look at $200 or $300 out of their pocket every month–that’s rent money, that’s money for groceries.

[B]Or CD money, beer money.[/B]

Beer money, whatever. They make those decisions on an individual basis. So, we represent an employee that may not see the advantages or the immediate benefits of health care.
So what does an individual mandate mean for your employees?[/B]

It’s a burden. Any time you mandate something on an individual, it’s a burden. It may be rooted in the best intentions. You’re mandated to have car insurance. That is arguably a burden, but from a societal standpoint, there’s a bigger picture and a bigger benefit for society as a whole.
The individual mandate is probably going down the right path. But from an employer’s standpoint, let’s say under the governor’s proposal you had a 4-percent payroll tax. Lets say you are paying 4 percent of your payroll toward health-care costs for the managers. And that covers just the managers, but the rank and file employees aren’t covered. That’s going to create and environment where employees are feeling the pressure from the government and therefore be looking to their employers to provide what is being required of them.
You’re saying employers shouldn’t be responsible for health care?[/B]

The nexus between somebody being employed and having health insurance is almost identical to the nexus between somebody being employed and having auto insurance.

We understand there are 6.5 million people who are uninsured and there’s got to be a way to insure them. But we aren’t necessarily sure that we agree with creating that nexus–that because they are working, the employer should provide health insurance. You could make a similar argument that because they are working and driving to work that auto insurance ought to be covered by the employers.

It is absolutely a societal problem. Every Californian ought to be bearing some of that burden. And it always comes down to who pays. How can we spread that burden broadly enough and thinly enough so that it doesn’t feel like a burden? That’s ultimately the question that the governor and legislature have to answer.

[B]Are there proposals you like better? The Republican proposal, or Senator Kuehl’s SB 840?[/B]

I’ve had a number of conversations with Senator Kuehl. If you’re looking at a single-payer system in Canada or the U.K., experts will tell you that those systems are looking for a better way to deliver health care.
But in the funding mechanism for those systems, the society bears the burden. And its borne through a fee or a tax, in a non-regressive way. What Senator Kuehl is proposing, I don’t know if it’s better. But we think that if you were to figure out a way to address this societal issue and have everyone in California pay for that burden, that’s probably a better way to go than to disproportionately impact doctors, hospitals and employers.

What are the chances of something getting done this year?
Without question something is going to happen this year. If not, the debate is going to continue next year. We’ve always understood that this is a debate that needs to be engaged in and an issue that needs to be solved.

[B]What if something gets done that sticks it to the employers? Will you go to the ballot to undo it?[/B]

If the Legislature passes something by a two-thirds vote, then there’s no referendum. Now, if it were a majority-vote bill, and it were to have an impact like SB 2 had on our industry, we would have no choice but to do what was done with SB 2 and Prop. 72.

Who knows? The people may feel differently than they did in 2004, but at a minimum we think they ought to be involved in the process.

Contact Cosmo Garvin at

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