When a guest said Obamacare made him sell
his business, I called him for his full story. It was more complicated
Eric Stern
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| Megyn Kelly (Credit: AP/Richard Drew) |
Bill Lawrence of Texas recently posted on his Facebook page that he sold his business because of Obamacare.
Naturally, Mr. Lawrence was then invited on Fox News
to be interviewed about his ordeal. He was on the Megyn Kelly show a week ago Friday.
Most
of Kelly’s questions were fat softballs or in some cases just
statements (“Employers like you might just have to say, ‘I’m gettin’ rid
of my company!’”; “Your thoughts on having your livelihood directly
affected based on what politicians in Washington felt was best for
you?”).
I looked up Bill and decided to give him a buzz to learn
more. He lives outside of Houston. We spoke for 45 minutes. He’s a guy
who’s sort of hard not to like — funny, very sharp and obviously a very
good businessman who built a large business from scratch.
Bill
recently sold his company Bubbles Car Wash, with 13 locations and 290
employees, to a private equity fund for what he admitted was a
tremendous price. “I’ve been very successful,” he acknowledged. (He
boasted in a 2011 Houston Business Journal article that he owns
two Mercedes and a Bentley convertible.)
With
290 employees, his business would be subject to the Affordable Care
Act’s employer mandate that kicks in in 2015 (assuming it isn’t delayed,
as it has been once already), which will force companies to offer
insurance to workers or else pay a penalty. Bill says it would have run
him in the neighborhood of $400,000 annually.
My first question to
him was: Would he show me some of his business’s financial records?
Maybe an annual report, preferably something audited, so I could analyze
his claim about the catastrophic effect Obamacare would have had on his
business? He would not.
Did Megyn Kelly request such verification? No, he said, she did not.
I
then pressed Bill on whether there were any other reasons he was
selling his business. He admitted to me that there were plenty of others
(“myriad reasons,” in his words). What were some of them? “You ever
run a business?” he asked with a chuckle. And then he began ticking off a
bunch of problems in his life that he said he’d now be glad to be rid
of. The headache of managing workers. Taxes, fees and permits of every
shape and size and color (dumpster permits, gate permits, this permit,
that permit). He complained to me that he has to pay $300 for an “auto
dealer’s” permit just to sell air fresheners at the checkout counter of
his car wash centers.
From
the sound of it, Gov. Rick Perry is more to blame for Bill’s choice to
retire than Obama. Perhaps Texas is not the pro-business eden that Perry
portrays it to be.
Nonetheless, Bill insisted that the Affordable
Care Act was the “primary” reason he chose to sell out and retire after
22 years. He told me he spent a year attending seminars and seeking
advice from lawyers and insurance experts on the employer mandate, and
it was universally made clear to him that the new federal law would make
it too costly to stay in business.
There’s no questions that
Bubbles Car Wash will have to absorb a new cost under the employer
mandate. The question is how great it will be, and whether it will
impact the business enough to have required Bill to unload it. Although
Bill wouldn’t show me any hard financial data, I asked him if he could
give me a brief sketch of his company’s revenue. He thought for a while,
and then said he’d estimate that the company had around $13 million a
year in revenues and about $900,000 in earnings — earnings, meaning
post-salary (he wouldn’t tell me what his annual salary had been as an
owner of the business).
Bill also told me most of his wage earners
do not want health insurance.
He’s offered a mini-med program in the past, a very cheap and
bare-bones plan that employees could purchase, and they usually decline
it. If that’s the case, Bill’s burden will be much smaller than what he
told Megyn Kelly. Under the Affordable Care Act, Bill must simply offer
his employees a chance to share in the cost of an insurance plan. The
worker’s share can legally be as high as 9.5 percent of the worker’s
household income. Once Bill has made this offer to an employee, if the
employee declines the coverage then Bill is off the hook and doesn’t
have to pay a penalty.
And sadly, Bill might be correct that his
wage earners (who earn $8.50 to $10 an hour) can’t afford to spend as
high as 9.5 percent of their salaries sharing the cost of an insurance
plan.
I sent Bill an article from a
recent Forbes magazine
that shows how businesses of his size, and specifically Texas
businesses, will have ample opportunity to keep Obamacare costs very low
by strategically offering insurance plans that they know their
employees will reject, forcing them onto the individual exchange in some
cases. He did not respond.
Incidentally, Bill also told me that
the private equity company that bought him out had approached him as
early as “three or four years ago,” so he was at least speaking to the
buyers before Obamacare ever existed. A spokesperson for the new owner
refused to talk to me for this article. Suffice it to say, however, that
a private equity firm sees enormous potential in Bubbles Car Wash with
or without Obamacare.
In the final analysis, Bill is a strong
conservative who believes government has no business saddling him with
new costs. He said it would be nice if every citizen could be insured,
but “even if the cost were only 10 percent of what I’ve estimated,” he
said to me, “why should the federal government make it
my responsibility to pay for it?” (We decided to agree that there is no right or wrong answer to that question, only opinions.)
And
as for Megyn Kelly, she asked very few probative questions before or
during the interview, preferring instead to just take Bill’s claim about
Obamacare at face value. But clearly there was another side of the
story.
Special thanks to Bill Bertovich, one of my readers, who tipped me off to the above segment.
Eric Stern lives in Helena, Montana. He was senior counsel
to Brian Schweitzer, former Governor. Follow him on Twitter at
@_ericstern.
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