Beware success! San Diego wholesale bakery Baked in the Sun has been enjoying more success recently, thanks to hard work by owners Rachel Shein and Steve Pilarski, who are married. They survived the recession, but now they may not survive Obamacare. Shein and Pilarski made the profit-killing mistake of growing the business. Looming next year is the mandate to provide medical insurance to all 95 employees. Now, according to a New York Times article, they have to decide whether to pay the per-employee $2000 fine or purchase medical insurance.
Ms. Shein was given a wildly optimistic figure for a company medical insurance policy: $108,000 per year, or about $1200 per eligible employee. Given that most policies cost $15,000++ per employee, one has to wonder where she got that figure. Perhaps she meant $108,000 per month. Even on the unrealistic per year basis, that's half the company's yearly profits. Why run a business when your hard work is punished?
Or you could take the approach of the owner of Cupcake Royale in Seattle, quoted later in the NYT article. Owner Jody Hall says providing medical insurance for employees is the right thing to do. Oh wait! A dozen cupcakes costs $40 dollars. The ingredients for a cupcake -- about 25 cents. In fact, the customers are underwriting Cupcake Royale's claim of self-sacrificing corporate responsibility. Any company that hopes to stay viable will be passing the costs of Obamacare on to customers. So Baked In The Sun will likely have to raise prices significantly, especially when it becomes clear that medical insurance is going to cost a whole lot more than $1200 per employee per year.