Starbucks CEO Switches View on Obamacare’s Employer Mandate

Published May 10, 2011


In the latest round of public opinion shifts among employers regarding President Obama’s health care law, Starbucks CEO Howard Schultz has done an about-face.  Originally a strong supporter of Obamacare, he has now expressed worry about how the employer mandate to provide insurance may harm businesses, including his own.


Burdensome Mandate

In an interview with The Seattle Times in March, Schultz responded to a question about health care costs saying that the cost for Starbucks in 2010 was roughly $250 million.

“We have faced double-digit increases for almost five consecutive years with no end in sight. So when I was invited to the White House prior to health care being reformed, I was very supportive of the president’s plan, primarily because I felt it was literally a fracturing of humanity for almost 50 million Americans not to have health insurance,” Schultz said.

While acknowledging the need for people to be insured, Schultz said the mandates within the law would pose a heavy burden.

“I think as the bill is currently written and if it was going to land in 2014 under the current guidelines, the pressure on small businesses, because of the mandate, is too great,” Schultz said.


Harms Businesses, Employees

Beverly Gossage, director of HSA Benefits Consulting, agrees the mandates will be harmful.

“The government will dictate the type of plans offered, usually raising the cost of the plans. An extra layer of accountability is added as the business must determine the ‘family’ incomes of its employees to calculate if they qualify for subsidies,” Gossage said.

“Businesses must interface with the federal government for reimbursement for these subsidies. Companies must make certain their plan offerings meet the ever-changing government guidelines. Companies like Starbucks with a revolving door of employees will have to hire extra HR staff to keep up with all the tracking and paperwork,” she added.


Supporters Turning Away

Christie Herrera, director of the Health and Human Services Task Force at the Washington, DC-based American Legislative Exchange Council, says Schultz is not alone in his concerns.

“Starbucks CEO Howard Schultz is just the latest in a string of about-faces from health law supporters. What Howard Schultz is realizing now is something that we’ve known from the start: The so-called Affordable Care Act will cripple small business growth,” Herrera said.

“Businesses should be focused on employing our workforce and growing our economy, not worrying about mandates from the federal government,” Herrera added.


Advocating Portability

Gossage suggests a different course for Starbucks.

“For businesses like Starbucks who care about their employees’ access to health insurance, they could accomplish a win-win by doing the following: Lobby to repeal Obamacare, then increase their employees’ salaries by the amount paid for their health insurance benefit, less any tax deduction difference lost from going from benefit to salary,” Gossage said. “This allows the employees to have expendable cash to go to the open market and buy a private policy just like they do now for auto, home, and renter’s insurance.”

Gossage points out moving to a private policy would give employees a portable solution—if they leave their job at Starbucks, they don’t lose their insurance.

“Employees get more plan choices, more affordable options, fewer worries. They can’t be kicked off a plan because they get sick, and their rates can’t be raised due to their personal claims,” Gossage said. “Employers can drastically reduced HR staff, have no hassles with dealing with COBRA, carriers, TPAs, and claims issues, and will find it easier to budget the cost of hiring an employee while providing more competitive salaries.”


Employee Flexibility

Gossage says empowering these younger workers to enter the marketplace, will give them more flexibility while benefiting the employer’s bottom line.

“Employees today, particularly younger workers like Starbucks generally has, are more mobile and want a portable policy,” Gossage said. “They don’t like their employer or the government selecting their health insurance package any more than they want them to pick their cell phone package.”


Sarah McIntosh, Esq. ([email protected]) is a constitutional scholar writing from Lawrence, Kansas.