White Castle: Health Law Hurts Profits
White Castle, the restaurant chain famous for the mini-burgers affectionately dubbed belly bombs, says the new health law will miniaturize its profits, too.
House Minority Leader John Boehner (R-OH), who helped lead the Republican opposition to President Obama's health overhaul, says the Ohio-based company claims a penalty on employers that don't offer health coverage to workers would be "devastating," cutting its profits in half. Boehner shared the worry in a press release recently.
The hoo-hah is just one example in the battle for public opinion that has raged since the health bill became law. In this case Boehner jumps on the firm's concerns to paint the law as a job killer.
White Castle spokesman Jamie Richardson asserts that the eatery would have to pay $3,000 in annual penalties to the government for each employee whose share of health care premiums exceeds 9.5 percent of income. Those penalties would add new costs that would take a 55 percent bite out of the burger purveyor's profits. Richardson tells Shots, "It's pretty dire."
Indeed, if employees turn down employers' offers of health coverage to get new government subsidies, companies will have to pay the $3,000 penalty to help cover the cost of the taxpayer-funded subsidies. (Here's a quick explainer from an accounting firm.)
But, Boehner's press release doesn't point out White Castle would no longer be paying for health insurance for those workers. The average premium for families that get insurance from their employers was more than $12,000 in 2007.
For White Castle to lose money because of the provision, it would have to spend less than $3,000 on health benefits for each employee. Richardson declined to discuss the details of health expenses because the firm is private, he said, but all full-time employees are offered insurance. Total spending on benefits was $55 million last year.
Paul Van de Water, of the Center on Budget and Policy Priorities, said it was hard to see how the White Castle's gloomy calculation could add up. But, he acknowledged: "Fast food restaurants may have to raise the price of the hamburgers by a few cents to pay for health insurance for their workers.” (See Van de Water's analysis of the employer penalties.)
White Castle happens to have another connection with the White House beyond fretting the overhaul. Kalpen Suresh Modi , known in Hollywood as Kal Penn, starred in the 2004 film, Harold and Kumar Go to White Castle, before joining Obama's staff as associate director of public engagement last year. The movie, perhaps the all-time zenith of product placement, follows the quest of two New Jersey stoners to get their hands on some White Castle burgers.
Richardson said the film is "really a love letter to us." Modi, who is reportedly leaving his White House post, can add to his resume that his performance as Kumar landed him a place in White Castle's "Cravers Hall of Fame," a fan club.
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