Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

The Wendy’s Co (WEN), Wal-Mart Stores, Inc. (WMT) & The Coming Obamacare Unemployment Surge

Starting Jan. 1, businesses with 50 or more full-time workers will have to provide company-sponsored health care insurance or pay a $2,000 per employee penalty.

With the cost of the average cost of a single-coverage health insurance policy premium averaging about $5,600, according to the Kaiser Family Foundation, on the surface it certainly seems cheaper to simply pay the penalty. A business with 50 employees would have a choice between paying an average minimum cost of $280,000 in premiums or a penalty of $100,000 for not providing coverage.

Do or die
Surprisingly, it’s not as simple as the cost analysis suggests. According to the National Small Business Association, 71% of 400 businesses it surveyed with 50 or more employees intend to continue providing coverage. That was reiterated by a recent Wall Street Journal/Vistage poll that found more than three quarters intending to provide coverage to avoid penalty. Less than 2% of respondents said they would go the route of paying the penalty.

There might be a couple of reasons for that. First, providing health insurance coverage could be an attractive qualifier for skilled employees or highly desirable managers, and second, the cost of health insurance premiums are tax deductible as a cost of doing business; the penalty is not.

The Wendy's Co (NASDAQ:WEN)

There’s also the possibility employees won’t take the coverage. The Wendy’s Co (NASDAQ:WEN) was initially a fierce critic of the health care law, but has more recently scaled back its rhetoric. It went from saying it would raise costs for each of its restaurants by $25,000 a year to now saying it will only cost $5,000 per store extra. That’s because it believes employees themselves will prefer to pay the $95 fine they’ll face than contribute to the hundreds of dollars in costs that coverage will cost them.

The cost of the unknown
Of course, some stores in its chain have also started reducing employee hours to 28 hours a week to get under the law’s odd definition of full-time being 30 hours or more of work per week.

Similarly, AFC Enterprises, Inc. (NASDAQ:AFCE) chain Popeye’s is counting on employees foregoing the cost of coverage to hold its own costs down. Currently, fewer than 5% of its employees enroll in the plan because it carries high deductibles and it costs costs $2.50 a week, or $130 a year. When they have to pay some $25 a week even though it offers more coverage, Popeye’s doesn’t see many more employees rushing to take advantage of it, as it will simply be cheaper to pay the fine — for next year at least, since the penalty more than triples to $325 in 2015, and hits a maximum of $2,085 for family coverage in 2016.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.