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May 2010
Volume 8, Number 5
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Impact of Healthcare Reform on Restaurant Industry
In March, the Congress passed and President Obama signed legislation reforming health care coverage. The stated goals of the reform were to expand coverage to those who were unable to obtain health insurance, and reduce the costs of health care through more active oversight of expenses. As with most public policy initiatives, these are positive goals, but the actual impact to the health care system will not be truly seen for some time.
The foodservice industry will be uniquely impacted by the reforms. First, the industry is made up of a combination of both large and small businesses, and is the second-largest private sector employer in the country. The requirements on businesses to provide access to health insurance for employees will change, as will the tax implications of those requirements. Second, the health care legislation includes menu labeling requirements that affect all chain restaurants with more than twenty locations.
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The restaurant industry is a significant part of the economy. Restaurant sales account for 4% of GDP, and total full-time employees are 9% of the work force. Overall, the industry employs 12.7 million people in approximately 945,000 outlets. The National Restaurant Association supported the goals of the health reform legislation while opposing the specific legislation. This was a common paradox for many businesses, trade associations, and consumers - increasing coverage and reducing costs are enticing ideas. The way in which the legislation achieves them is still controversial. The Association's concerns focused on changes to the small business exemption provisions to provide insurance, treatment of part-time workers, and the overall administrative cost to restaurant operators.
There have been few issues that have generated as much political debate and divisiveness as health care reform. Supporters of the reform point to the need for government to ensure access to medical care as part of the nation's social responsibility. Opponents see it as an overly large expansion of government at the expense of personal freedom, and a financial burden the country cannot afford.
As a broad overview, the key features of the health care reform are as follows:
- Beginning in 2014, almost every citizen and legal resident of the U.S. will be required to purchase medical coverage for themselves and their dependents
- Failure to obtain medical coverage will result in a tax penalty
- Medical coverage will be available from several sources:
- Employers
- The government, through existing programs such as Medicare (seniors), Medicaid (low-income), SCHIP (children), and Tricare (veterans and dependents)
- Private insurance companies
- Beginning in 2014, new state-run health insurance "exchanges"
The starting estimate for the first 10 years is that this near-universal health care will cost $940 billion. The estimate has already changed and in an unfavorable cost direction. There will be several different tax increases to offset part of this cost, including higher Medicare taxes on households making more than $250,000, higher excise taxes on employer-sponsored plans valued at more than $10,200 for an individual or $27,500 for a family, and new fees and taxes for pharmaceutical companies, health insurance companies, and medical device manufacturers.
The requirements for small businesses to provide health insurance are changing. While providing insurance is still optional, the tax incentives to provide it are greater. And, businesses are encouraged to offer plans that provide similar coverage for all employees. For all businesses, small and large, if health insurance is offered, it has to be offered to all employees. The business must contribute to the cost of the insurance. The minimum contribution ranges from 65% of the cost of a family plan to 72.5% of the cost of an individual plan. The minimum contribution is based on the cost of the cheapest plan offered.
Starting in 2010, businesses will receive a 35% tax credit if they have 10 or fewer employees earning less than $25,000 on average, and a smaller tax credit if they have 25 or fewer employees earning less than $50,000 on average. The tax credits will increase to 50% in 2014, the first year coverage will be required. Approximately 4 million small businesses will be eligible for the tax credit.
In 2014, businesses that employ 50 or more people will be fined per full-time employee if they do not provide health insurance. There is no penalty if fewer than 50 people are employed, and the penalty will not apply to the first 30 employees not covered.
Employers would not have to provide benefits to part-time workers, and full-time workers would have a 90-day waiting period before they would be eligible for health insurance.
There are several consumer protection provisions that are included in the legislation. Insurance companies will no longer be able to deny coverage based on pre-existing conditions, and cannot cancel policies when someone gets sick. Preventive care and vaccinations will be covered without deductibles or co-payments applying. Reactions to these changes are mixed - while some costs of care will increase, the expectation is that long-term costs of care and more complex care will decrease based on more preventive care being provided. Starting in 2011, insurance companies will be required to spend at least 80% of premiums on care.
Benefit consulting groups have cautioned that the overall reaction of many businesses was out of proportion to the actual change. 89% of all U.S. businesses employ less than 20 people, and none of these will be required to provide coverage or change their way of doing business. The tax incentives are designed to encourage these firms to offer health insurance, although it remains to be seen how many will actually change their benefits. For businesses with more than 50 employees, the total cost increase under the new plan is estimated at 2-4%. While small on the one hand, it can represent more than the total gross profit of many businesses, so some or all of this cost increase may have to be offset by other cost reductions or price increases for consumers.
This fuels one of the most serious concerns for restaurant operators. Just as the industry begins to emerge from the depths of a recession, it is faced with a possible double-whammy of increased operating costs. However, some operators see it as a way to level the playing field with the larger chain restaurant companies and corporate operators. With the tax credits, some small operators see the possibility of using health benefits to attract and retain employees.
Even with the debate over how the reform was implemented, there continues to be consensus that some changes to our health system were necessary. The cost of health care has risen at 3 times the rate of wage growth since 2000. Premiums for employer-based health insurance have doubled over the past ten years. Employer-based coverage provides health insurance for 61% of working age individuals and their families. Another 5% of working age individuals purchase private insurance; the bulk of the uninsured comes from the remaining 34%. Only 63% of all businesses provide health insurance benefits, and increasingly coverage is only offered to the individual employee, without covering that individual's family or dependents.
Small businesses are disproportionately affected, since on average they pay 18% more than large firms for the same coverage. The high cost is the main reason less than half of small businesses offer health insurance benefits for their employees.
The menu labeling provisions of the health care bill represent an overall positive for the restaurant industry. The federal law will pre-empt all existing state and local menu-labeling requirements, which were inconsistent and cumbersome for multi-state operators to comply with. Additionally, operators will have protection from frivolous litigation over the accuracy of nutrient content disclosures.
Currently, the states of California, Maine, Massachusetts, New Jersey, and Oregon, cities including New York City and Philadelphia, and other smaller localities all have different laws regarding menu labeling.
Chains with 20 or more units will have to post calorie counts for standard items on menus, and calories per serving for items on buffets and salad bars. Daily specials, custom orders, test market items, items not offered for at least 60 days out of the year would be exempt. Disclosure for new items would not be required for the first 90 days the item is offered.
Additionally, restaurants will have to post a standard statement regarding daily caloric intake and let patrons know that additional nutrition information is available on request. This additional information would include calories from fat, total fat, saturated fat, cholesterol, sodium, carbohydrates, sugars, dietary fiber and protein.
At Kingston, we will continue to monitor these issues and bring you updates as new information becomes available.
For more information, please contact your Customer Service Representative or Jody Boline.
Sources: New York Times, Wall Street Journal, Nation's Restaurant News, National Restaurant Association, U.S. Department of Health & Human Services, Congressional Budget Office, U.S. Chamber of Commerce
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Onions
This growing season has seen unusually cold, wet weather affect the southern growing regions in Texas and Mexico. As a result, the fresh onion supply is severely depleted.
Generally, this time of year we see a large influx of onion supply from Texas. These fresh market onions create competition with supplies from the Northwest, which tends to keep prices in check. The lack of supply from Texas this year has caused significant variability with prices and supplies. While supply is improving as weather gets warmer, it will be some time before levels reach normal. Additionally, much of the Mexican crop was lost to the weather, and this has reduced available supply for export to the U.S. Currently, the main struggle is to find supply to cover orders, although pricing is also a real concern.
The onion market is currently very high and unpredictable. Additionally, end-of-season onions are showing quality issues. We are currently seeing translucence, some black mold, "beat-up" appearance and even some sprouting. Newer crop onions look dirty, as a result of the late rains that have soaked fields in Texas.
As we move into mid-May, conditions in Texas will improve and we will begin to see volume from the Imperial Valley in California. This should mean better quality, more supply, bigger single-center onions, and some relief in price. One caution is that the transition from Southern to Central California is usually difficult, and this year may be more difficult than an average year.
For more information, please contact your Customer Service Representative or Jeb Johnson.
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Rail Information
UPRR fuel surcharge for May will be $0.17 per mile.
$48.8B in highway funds ready
The U.S. Department of Transportation announced $48.8 billion in highway funds is available to state departments of transportation for federal projects through the Hiring Incentives to Restore Employment (HIRE) Act.
"With spring and summer highway construction seasons just beginning, these funds will help make it easier for states to put people back to work and begin long-term projects," said Secretary Ray LaHood.
The HIRE Act, which was signed into law last month, included a provision that extended funding authority for surface transportation programs through Dec. 31. The law provides $40.1 billion from the Highway Trust Fund for highway programs for FY 2010.
In addition, the HIRE Act restores $8.7 billion to state DOTs that was rescinded last year due to a provision in the "Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users" (SAFETEA-LU), surface transportation program authorizing legislation enacted in 2005.
SAFETEA-LU expired Sept. 30, and since then, Congress has passed a series of small, short-term funding extensions based on SAFETEA-LU.
For more information, please contact your Customer Service Representative or Jeremy Teeples.
Source: eTrucker.com
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Each month in the E-News, we will share insights into the activities of the Kingston Quality Assurance team as they visit growers, packers, and distributors. We hope this will help give you more information on our commitment to food safety and security. This month's report is from Cindi Thompson, Food Safety/Quality Assurance Supervisor.
Dodder / A Parasitic Plant
Farmers are generally focused on insect pests, fungus, and disease as the primary sources of harm for crops. However, sometimes invasive plants can be an even more dangerous factor, damaging crop quality. These are not simply weeds, but actual parasitic vegetation. The most common is the Cuscutaceae member of the Morning Glory Family, commonly called "Dodder."
Dodder comes in two main varieties, Cuscuta and Grammica. There are seventeen identified individual species of Dodder, which manifests as a twining yellow or orange plant sometimes tinged with purple or red. Occasionally it is almost white. The stems can be very thin and thread-like or relatively stout, depending on the species.
This plant is difficult to control and a huge problem for onion farmers, as it can devastate entire sections of production. It can be particularly problematic for onion seed production, as it is difficult to remove from the desired seed crop and can be spread with infested seed.
Dodder attaches itself to a host plant via tendrils called Haustorium, which are its roots. These roots penetrate the host plant's tissue and absorb minerals, water and carbohydrates until the host plant is either dead or severely compromised.
Flowering from early June through late summer, one Dodder plant can produce upwards of 16,000 seeds. These seeds not only travel via waterways, wind and animal movement, but they can remain viable for very long periods of time, up to 60 years, depending on conditions. Unlike most parasitic plants, no host plant is necessary for Dodder to germinate. All of these factors mean Dodder is a patient, enduring pest that can haunt production for years and years.
Even more insidious, Dodder is a major vector of plant diseases. Dodder has been shown to spread yellow onion disease, often referred to as the 'Iris Virus,' along with pear decline, aster yellows, tomato big bud, and certain forms of necrosis and bacteria.
Dodder's wide range of hosts and incredibly long seed viability make it very hard to control and practically impossible to eradicate. Application of pre-emergent pesticides can help prevent Dodder, but application must be correct and consistent and is not a permanent answer.
QA will definitely note when Dodder is present in a field. It can be a huge indicator about the overall health of a growing region and may have a major influence on production and markets during that season and for years to come.
For more information, please contact your Customer Service Representative or Jeb Johnson.
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Each month, one of our associates will share one of their favorite recipes using different Kingston products. We hope you will try one or all of our family recipes, and all of the great ways to enjoy our high-quality, wholesome products.
Sommers' Summer Salad
Salad Ingredients
2-4 Cups Kingston Romaine Lettuce, chopped
2-4 Cups Kingston Spinach, chopped
1 cup strawberries, sliced
1 cup mushrooms, sliced
1 medium avocado, sliced
½ cup slivered almonds
Dressing Ingredients
½ cup sugar
¾ teaspoon dry mustard
2/3 teaspoon salt
¼ cup white vinegar
2/3 cup vegetable oil
½ t poppy seeds
Preparation
Mix all salad ingredients, except avocado, together in a large bowl and set aside.
Mix all dressing ingredients, except oil and poppy seeds, together in a medium bowl. Slowly add the oil and poppy seeds, stirring until well blended.
When ready to serve, toss dressing with salad, and add avocado on top for serving.
For additional sweetness, substitute candied almonds for slivered almonds. To make candied almonds, place slivered almonds in a single layer on a non-stick pan. Heat the pan on low, and sprinkle brown sugar generously over the almonds until they are covered. Keep stirring over heat until the sugar melts and caramelizes the almonds. Place them on wax paper to cool
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Kingston Service Anniversaries
Join us in congratulating our team members on their many years of service.
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| Darcie Hyde 8 years |
Jeremy Teeples 2 years |
Lydia Walstad 1 year |
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