So did you hear the one about the man who walks into a bar and paid extra for employee health care?
Only it’s not a joke. Gator’s Dockside, a chain of self-described “family-friendly, sports-themed restaurants” in Florida, has slapped a surcharge on customers ostensibly to cover the cost of implementing the Affordable Care Act. The surcharge, which works out to about 1% of the total bill, appears on customer receipts as “ACA Surcharge.”
A photo of the receipt posted on the web shows a subtotal of $21.15 with an applicable sales tax of $1.49 and ACA surcharge of $.20.
According to the Florida Department of Revenue, the sales tax rate in the state is 6%. However, discretionary sales surtax (called county tax) is imposed in many counties, driving total sales tax as high as 7.5%. At the Lady Lake location for Gator’s, the county surtax is 1%, bringing the total sales tax to 7%, as reflected on that receipt.
Sales tax is imposed on the price of the meal together with any charges that benefit the employer. This one (that ACA surcharge) does and as a result, sales tax is imposed on the meal plus the ACA surcharge. Here’s a quick check on the math on that receipt:
($21.15 + .20 = $21.35) x .07 = $1.49
The surcharge is intended to pass along the cost of the employer mandate under the Affordable Care Act. There’s just one catch: the employer mandate isn’t yet in place. It doesn’t take effect until 2015.
Under the employer mandate, employers with at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees equivalent to 50 full-time employees) must offer affordable health coverage that provides a minimum level of coverage to their full-time employees and their dependents. If the employer does not, it may be subject to an employer “shared responsibility payment.” Whether that happens is dependent on whether at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on the exchanges.
Health care coverage is considered affordable if an employee’s share of the cost of the coverage would not cost more than 9.5% of the employee’s annual household income. In 2013, the median household income for families was $51,017: 9.5% of that amount works out to $4,846. By way of comparison, the average annual premiums for employer-sponsored health insurance are $5,884 for single coverage and $16,351 for family coverage. Of course, since employers can’t possibly know the total income for an employee’s family, there are some “outs” available in the form of safe harbors.
If an employer is subject to the shared responsibility payment, it’s generally calculated by taking the number of full-time employees minus the first 30 full-time employees multiplied by $2,000. Gator’s currently employs about 250 full-time employees – and only the managers get health care benefits. Assuming that they would be responsible for the penalty, their potential penalty could run as high as $440,000 (250-30 x $2,000). Of course, that’s likely still far less than the cost of providing health care coverage to all of its employees – one of the glaring problems with the Act. As with the individual mandate, it’s still often cheaper simply not to comply.
That additional cost, according to the chain, is the reason for the surcharge. To alert consumers, they’ve posted a sign on some of their restaurants that reads:
The costs associated with ACA compliance could ultimately close our doors. Instead of raising prices on our products to generate the additional revenue needed to cover the costs of ACA compliance, certain Gator’s Dockside locations have implemented a 1% surcharge on all food and beverage purchases only.
The chain boasts 21 locations but not all of them have tacked the extra charge onto customers’ bills. Only eight have joined in so far.
Of course, businesses almost always pass along increases costs to consumers. That’s no big secret. When the cost of doing business goes up, so do prices at the register. You’ll likely see bumps in your grocery bill this year as vegetables are more scarce due to weather woes. Beef prices are soaring. Escalating gas prices have meant more expensive delivery costs on everything from books to flowers.
But it’s rare to see those costs broken out as a line item – and even more rare for the costs to be anticipatory. The move, viewed as more politics-driven than economics-driven, has resulted in quite a firestorm of feedback. The company’s Facebook page has been flooded with comments – mostly negative – in reaction to the move.
Last week, I reached out to Gator’s for more specific information about the surcharge, including whether the surcharge money was actually being put aside to be used for ACA-related costs. The chain, as of this writing, has declined to respond.
Even without the chain’s further input, discussions around the issue are fairly indicative of the conflict over the Health Care Act in general. Support for the idea of health care reform has been in place since the Act was introduced but the prospect of increased costs and complex administrative burdens have raised concerns about the practical aspects of implementation. That said, most businesses appear set to comply and taxpayers seem to be on board with those changes.
Few businesses have made discussions about costs as public as Gator’s has done. And those who have done so – Denny’s, Papa John’s, and Applebee’s come to mind – have not met with an understanding public. It does raise interesting questions for consumers: are you willing to pay more for ACA compliance and if so, do you want those costs broken out (when other increases are not) for the sake of transparency?
