Pelosi’s Health Care Bill Would Regulate Snack Machines at Estimated Cost of $56 Million the First Year

November 3, 2009 - 8:42 PM
Vending machine operators would be required to either create new machines that allow the customer to view nutrition facts or post nutritional information for each product "near the selection button."

A student whizzes by a high school vending machine in Delavan, Wis. (AP photo)

(CNSNews.com) – The House health-care reform plan unveiled last week by House Speaker Nancy Pelosi (D-Calif.) would do more than regulate insurance companies – it would even regulate vending machines. 

The bill, which is posted online, would require that vending machine operators either create new machines that allow the customer to view nutrition facts or post nutritional information for each product near “each article of food or the selection button.”

The regulation could wind up costing vendors millions of dollars to make the changes, according to  industry estimates.

Section 2572 of the bill (H.R. 3962) says, “In the case of an article of food sold from a vending machine that – (I) does not permit a prospective purchaser to examine the Nutritional Facts Panel before purchasing the article or does not otherwise provide visible nutrition information at the point of purchase; and (II) is operated by a person who is engaged in the business of owning or operating 20 or more vending machines, “the vending machine operator shall provide a sign in close proximity to each article of food or the selection button that includes a clear and conspicuous statement disclosing the number of calories contained in the article.” (See page 1,515 of H.R. 3962 Section 2572 (H) (viii).
 
The Congressional Budget Office (CBO) is currently working to determine how much the provision will cost the vending industry in changes to packaging or machines. The CBO also requested an estimate from the National Automatic Merchandising Association (NAMA) -- the vending machine trade organization. On Oct. 30, the vending lobby group released a preliminary estimate that the changes would cost tens of millions of dollars at the outset.

NAMA estimated that the first year start-up cost to comply with the basic disclosure would be $56.4 million.

According to Ned Monroe, the senior vice president of government affairs at NAMA, the money will be needlessly spent. 

“(O)ur position is that our products already disclose calories. Our items have nutritional information on the back of the packaging already,” he told CNSNews.com Tuesday.

For example he said, “a bottled water is obviously a low-calories item. People that purchase items out of vending machines—it’s not the first time they’ve tried the product, so they understand that there are certain calories in a chocolate treat versus a honey bun versus a baked chip.”
 
Monroe estimated that the new regulations, which would apply to vendors with “20 or more” machines, would affect 85 to 95 percent of the industry.
 
“This is a very big economic cost for our members, which are generally smaller vendors -- smaller business owners and operators,” he added.
 
The language in House Speaker Nancy Pelosi’s version of the health care reform bill is identical to language that appears in the draft bill that the Senate Finance Committee produced under Chairman Max Baucus (D-Mont.).
 
But Monroe says both chambers are shortchanging the small businesses he represents, arguing that it will be difficult to make up the cost of the changes.
 
“It’s almost impossible for these costs to be passed on to consumers,” he told CNSNews.com. “Our folks would like to, because their profit margins are so low, and anecdotal evidence says that the vending industry has dropped 17 percent in same-store sales. You know, when the economy drops, there are fewer people (using) the vending machines.”

“The other reason (vendors) can’t pass this along to the consumers is that our products are sold in 5-cent increments, and so if the cost is a penny or two pennies per item, that has to come out of the operators’ bottom line.”

Under the health-care bill, the exact cost of the nutritional makeover would not be ascertained until Health & Human Services Secretary Kathleen Sebelius writes the specific rules based on the health care legislation, which NAMA thinks could take 18-24 months. 

But Monroe said the impact will be “very big.”

“From our estimate, it’s almost $11 per machine for the first stocking or first labeling of the machine,” Monroe said. “Costs would then mount further as labels or menus had to be updated with newly stocked products. 

The industry is also concerned because the Senate is seeking to regulate what products can be sold in machines in schools --“all food in all schools at all times,” as Monroe described it.

Sen. Tom Harkin (D-Iowa) has introduced the Child Nutrition Promotions and School Lunch Protection Act of 2009, which would give the Department of Agriculture the regulatory authority over foods served. Harkin’s legislation was introduced in April and is still pending in committee.

Meanwhile, House Majority Leader Steny Hoyer (D-Md.) has said he expects to have his and Pelosi’s version of the health-care reform bill passed by Veteran’s Day, Nov. 11, while Senate Majority Leader Harry Reid (D-Nev.) has not yet produced a full Senate bill.