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The cost of Obamacare – 14 cents per pizza…

Papa John’s Pizza founder and CEO John Schnatter said he’s going to have to raise the price of his pizzas by 10 to 14 cents to cover the added cost of complying with Obamacare’s provisions. (turns out it’s only 3.4 to 4.6 cents per pie…)

Let’s think about that.  Fourteen cents a pizza gets all of his employees excellent health coverage (only about a third are covered now, even though Schnatter says he’d “like” to cover all of them….)  This isn’t to slam Schnatter, who by all accounts is a decent guy who raises money for worthy causes and tries to stay out of public politics.  He does get a bit too aggressive in his marketing efforts, but hey, that’s not the worst thing in the world.

Rather my concern is Schnatter’s perspective – which is consistent with what we’ve heard from other chain food outfits – is myopic – in several ways.

If his company doesn’t provide insurance for his low-paid workers, we taxpayers have to.  That’s the way Obamacare works; folks with incomes below 400% of the FPL (federal poverty level) can get subsidized coverage).  So, if Schnatter cuts his workers’ hours so he doesn’t have to insure them, all of us taxpayers get to pay for their health insurance.  Schnatter is avoiding his responsibility and increasing our tax burden.

Sure, you can protest that you don’t believe in/like Obamacare for whatever reason, but you don’t get to pick and choose where your tax dollars go.  I don’t like paying for subsidies for corn ethanol or grazing rights in Wyoming or all-but-useless medications for seniors or pointless and stupid wars, but “elections have consequences” (yes, that’s two Karl Rove quotes in less than a week…).

There’s a widely held belief that workers without health insurance file claims with workers comp if they get hurt off the job.  Overall, this doesn’t seem to be the case, but there’s no doubt individual workers do try this, and some are successful.  Thus Schnatter’s position may lead to increased workers comp costs, however slight.

Finally, as long as he’s stuck with Obamacare’s coverage requirements, there’s this marketing angle – “you should buy Papa John’s because out pizzas are better than anyone else’s, because our people are happy and healthy.  And we take care of our workers, not like those schmoes at (pick a rival pizza company).”

22 thoughts on “The cost of Obamacare – 14 cents per pizza…”

  1. It seems that we lose either way. We either pay more for products, or pay more in taxes, or both. Another option is to put more employees on part time, which will decrease their take home pay which causes more hardships. Those people will buy less products because of reduced income. All of us will buy less if our taxes go up. American Companies will be less competitive if we increase cost, so more products are imported or more jobs exported. Seems a zero sum game.

  2. Joe, it’s presumptious of you or anyone else to know the profit margin model a specific business is guided by. 10 to 14 cents may be most or all of that margin per pizza.

    1. Steve – thanks for the comment.

      Actually, I did not claim to know the margin, and in actuality, it’s not presumptuous at all. Papa John’s margins are public knowledge. Moreover, having run a pizza restaurant way back in the day I have direct experience with this specific type of business.

      But again, I didn’t claim to know Papa John’s margin.

      Joe Paduda

  3. Joe, I do question the phrase “Schnatter is avoiding his responsibility”. I am wondering when providing for employees personal needs (and health care is a personal need) became the employers “responsibility”. I am hoping for a bit more morally based response than “because it is the law”.

    However, assuming it is “because it is the law”, I would point out that that same law allows employers to exempt those employees who do not work 30 hours a week or more. That means legally he has no responsibility to avoid for those workers. The law of the land grants him that opportunity.

    God Bless America, at least what is left of it…..

    1. Agree. Also he will be at a big disadvantage if his competitors put everyone part time, and he continues to have full time employees and has to charge more for his Pizza. Then he becomes uncompetitive and I don’t believe in this economy people will pay more because “our employees are more healthy and happy.”

    2. Bob – thanks as always.

      In response to your query as to when it became an employers’ responsibility to provide health insurance, that would have occurred when PPACA was passed, signed into law, and upheld by the Supreme Court. Laws run this country, not morals. If “morals” did, we never would have invaded Iraq or waterboarded prisoners or interned Japanese Americans or overturned legitimate governments in Africa and central America or supported the Shah of Iran. “Morals” are personal; laws are societal.

      As to a potential decision to cut employees’ hours, I’d reiterate that in doing so Schnatter is requiring you and I to pay for his employees’ health care costs. That is a personal decision on his part, and one he is indeed entitled to make. However, in doing so, he is choosing personal gain at the expense of society as a whole.

      Finally, I’d have been more than fine if health reform removed employers from the business of providing health benefits to employers, and many in Congress would have agreed (single payer, anyone?). However, many large employers did not want to lose that authority, the insurers certainly wanted things to remain as is, and brokers/agents/consultants did as well.

      As the troops in Vietnam used to say, “there it is.”

      1. Joe, enjoy the repartee as always….

        You are absolutely right concerning the difference between moral and legal standards. I would point out, however, that it is the legal world through which we often enable immoral behavior.

        Franklin Roosevelt interned thousands of Japanese with an Executive Order that was upheld by the Supreme Court. African American Slaves in this country were bound to that system by the law of the land. In fact, all of the issues you cite were conducted through the instruments of national or international law in their day.

        And you talk about waterboarding terrorists like it was a bad thing…..

        Schattner is not requiring me to pay for his employees health care. My government is. Schattner can pass no laws – he must just work to survive with the laws that are passed.

        In the view of many, this law is no more “moral” than many of the others cited in our discussion. I do not understand why the employers are now the primary responsible entity for this function. Perhaps they should also be required to provide housing, food, transportation and utilities – all are needed as much or even more than health care.

        Schattner might be cheap. He just might be a patriot. Time will tell.

        1. Bob – good to have you back.

          Your comment “Schattner is not requiring me to pay for his employees health care. My government is. Schattner can pass no laws” is correct as far as it goes, however:

          1. the “government” was duly elected by the citizens. The government is us. Just as it was when Bush exploded the deficit and invaded Iraq and tortured people, that’s our responsibility.

          2. Schattner and his ilk spend billions in an effort to elect politicians that agreed with them and would pass/enforce laws in keeping with those agreed-upon positions. They lost. Schattner tried to get his views made the law of the land, and his effort was defeated in an election. Now he has to deal with the consequences.

          3. Employers, hospitals, providers, pharma, device manufacturers, labor unions, taxpayers, all of us are stakeholders in the problem, and we are part of the solution. hospitals lost significant funding, pharma’s had to pay billions, device manufacturers have an excise tax, rich union plans are taxable, and employers have to provide coverage or pay a penalty.

          We are all part of the same “system” and we all must work/contribute to fixing the disaster that is that system.

          and I just can’t resist; why aren’t you protecting the unions’ rights to lavish non-taxable benefits? Is it somehow more moral for the government (us) to impose a tax on a benefit that was negotiated in good faith?

          1. My apologies – I did not intend to invade your blog for an extended stay. But as long as I am here…..

            We all must now contend with the consequences of the election. My original point that Schattner is within his rights and responsibilities holds. If you do not like the loophole provided him, support better candidates for your side next time.

            And as for the union question, I assume we are talking about benefits lavished on public sector unions. Whatever makes you think that a benefit lavished upon public sector union members was negotiated in good faith? It is not possible. Even FDR opposed public sector unions as it positioned its members to negotiate with those who had no skin in the game. A union negotiates with an elected official who lavishes taxpayer largess upon them in exchange for votes and financial support. What in that scenario remotely resembles “good faith”?

          2. Bob – always good to have you here on the correct side.

            I was not referring to public employee unions; most of the health plans that will be subject to the “Cadillac” tax are from non-public workers. Those were negotiated back in January 2010.

          3. I actually do not support a tax on any Cadillac plans, as that in the end will serve to lessen care to those who have them, and seems contradictory to the stated goals of the program. It is merely a tactic to force resource shifting to others. Bolder people would call it a form of rationing.

        2. It is not persuasive nor historically accurate to say that “…it is the legal world through which we often enable immoral behavior”. The examples of American slavery, internment of Japanese Americans, and the like, are but examples of how “immoral behavior” is codified by those who hold the reigns of governmental power – at the local, state and/or federal levels. Joe is on point when he says that elections have consequences and whether we supported the election official or not our legal responsibility as “citizens” is to obey the laws whether we like them or not. That is the American Way is it not?

          1. Ralph, we just flat out disagree. Your statement regarding “immoral behavior” being “codified by those who hold the reigns of governmental power” does not dissuade me from my initial assertions; in fact I think it supports my argument.

            You are correct, following the law is the American way. No where in these discussions has Joe or myself indicated anyone had not followed the law. Not the point.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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