Why is it so difficult for Philly restaurants to offer health insurance?


Skinny margins and high staff turnover put restaurant owners in distress. Some companies find their own workarounds.

Illustration by Malachy Egan

When Sarah Myers was diagnosed with ovarian cancer in March 2021 after working in the hospitality industry for more than a decade, she wondered if the disease would force her to switch careers.

“There was a part where I was like, ‘Okay, maybe it’s time for me to go into the nonprofit sector,'” says Myers. “I worked in restaurants and then also at a non-profit to try and build my resume. But I also noticed: I don’t want to do anything else. I really like working in gastronomy. That’s why I do it. I just needed to figure out what my workaround was.”

In October of that year, Myers accepted a position at Clubhouse for middle child in Fischstadt. First, their health care was covered by Medicaid, which they had subscribed to before their diagnosis. But when an opportunity arose to accept a job as the restaurant’s service manager — a job that would come with more money and responsibility — Myers was concerned that the increase in income would alter her Medicaid eligibility and potentially significantly increase and even nullify her health care expenses would raise salary.

Myers is one of less than 50 employees at Middle Child. According to that Affordable Care Act, Middle Child’s owner Matt Cahn is under no obligation to offer health insurance for a company of this size. Even so, Cahn says, he spent an enormous amount of time researching insurance plans. The labyrinthine systems of the healthcare world have become something of an obsession for Cahn, who has been obsessed from the start.

“If I put so much attention to detail into crafting a shopsin’ club and figuring out how to salt and roast a turkey breast, why not do the same with something that actually impacts people’s lives?” Cahn says. “At the end of the day, sandwiches are fucking sandwiches and it doesn’t matter at all. But people’s livelihoods – that’s really important.”

It’s no industry secret that historically, health insurance was unavailable to most workers in small, independent restaurants. According to a 2019 Restaurant Success Report published by popular restaurant technology platform Toast, 31 percent of the restaurants surveyed offered health insurance. (Cahn says none of his previous restaurant jobs included health insurance.) In these environments, small margins and high staff turnover make offering benefits expensive and complicated.

This lack of insurance options for restaurant workers has created a sort of secondary network of health care options, Myers says. “Employees, especially those who have been doing this for a very long time, have their workarounds if they didn’t have health insurance,” says Myers. “They’ll say, ‘Oh, I know this clinic that does free teeth cleanings every other Monday.’ We have all these little tidbits of information because our healthcare has been inaccessible to us for so many years.”

Workarounds aside, the general inaccessibility of restaurant employee health insurance contributes to staff turnover — which is one of the factors that make offering benefits to owners so difficult in the first place.

“I see the lack of benefits as an obstacle for us to grow our industry and help solve the workforce problem,” says Maria Campbell, founder of Chefs who care, a program of the Community Foundation. Campbell founded the organization in 2017 in response to what she sees as a mental health crisis in the industry. Much of her work at Cooks Who Care focuses on developing more robust health insurance options for restaurants to make the industry more attractive to workers of all backgrounds.

One of Campbell’s goals is to create a fund that offers micro-grants to offset all types of healthcare costs for workers in the industry. Those payments, which Campbell says could be as high as $300, would help pay for things like an uncovered prescription, whether or not a person has health insurance. Campbell hopes people can apply for money for everything from a one-time doctor’s visit to ongoing appointments with a therapist or even emergency care.

Micro-grants would be particularly helpful in addressing the needs of undocumented workers, who make up a large but difficult-to-measure percentage of the workforce across the country are not eligible for insurance regardless of their income or position. Until that policy changes, Campbell’s unconventional help (and other similar alternatives) will remain essential.

As Cahn prepared to open Middle Child, he found his own unconventional approach to his staff. “Technically, we don’t offer health insurance,” he explains. “I know that doesn’t sound good right off the bat, but I’m not interested in pretending, ‘Oh, we’re offering benefits, we’re offering benefits’, but it’s actually not good coverage and it’s great for everyone expensive involved.”

It was important to him to create as much stability as possible for the team. What Middle Child offers is assistance in accessing insurance. Any employee can use a private website created by a company with the name Dominic Finance, an independent insurance broker run by Matthew Domenick. The website details Middle Child’s offerings and contact information for Domenick and his team, who are acting as benefit advisors and liaisons with the state stock exchange. If an employee is not eligible for a minimum 25 percent subsidy (based on income) from the exchange, Middle Child will provide a taxable stipend to cover the difference.

During the planning phase of his search for health insurance, Cahn surveyed employees and found that most people were either not interested in health insurance or said they would opt for lower-cost, higher-deductible plans. The advancement of this option meant that someone hospitalized with a broken arm or stitches could still be on the hook for many thousands of dollars.

To protect his employees from potentially large medical bills for these types of emergencies, Cahn pays about $17 per employee per month to put every team member on an emergency plan through an outside insurance provider, which essentially provides catastrophic care — think of those Emergency room visits, intensive care unit admissions, certain types of surgeries and stitches.

Cahn considered offering a group health insurance plan — the most common option for large companies — that gives employees up to three options to choose from, all typically from the same insurance company (think UnitedHealthcare or Independence Blue Cross). He also inquired about health insurance startups — services designed to provide basic care at a lower cost without covering emergencies or chronic illnesses. But these types of healthcare startups don’t offer coverage for ongoing medical problems like Myers’ ovarian cancer. And they typically require a minimum number of employee logins, which can be prohibitive for small businesses.

Jill Weber, co-founder of Sojourn Philly, a local hospitality group with four restaurants and about 100 employees, says one of her challenges was getting enough people to sign up for offers, especially younger people, that would reduce group rewards costs.

Weber tells me that part of the reason for the low enrollment rates is that there are many young people working in the hospitality industry. These workers may be under the age of 26 and still on their parents’ health insurance – or simply not concerned about their health and therefore not interested in insurance.

Myers once felt that way. “I didn’t bother with health insurance until it was a necessity in my life,” they say. “I think that’s how people in the restaurant industry navigate health insurance because it’s been inaccessible for the vast majority of our careers.”

Employee indifference continues to be a problem for business owners like Weber, who are required to offer health insurance regardless of whether people want to use the benefits or not.

“It’s so, so expensive,” Weber says of her restaurant’s insurance package. “I think we only have about 35 people who have accepted health insurance with us, which is a shame because that’s part of the compensation package. And as wage expectations have gone up, it’s been difficult because so many people don’t think about health insurance.” Weber says the company pays more than 80 percent of the premium.

To offset insurance costs, Sojourn Philly has increased food and drink prices in its restaurants. There were other austerity measures as well. Fresh flowers, for example, are no longer available in any of their restaurants. But she doesn’t feel that the problem is solved.

Domenick, the independent insurance broker who works with both Middle Child and other restaurants in town, says the low enrollment numbers are partly due to staff turnover. Employees miss the enrollment window because there is no one to guide them through the process, while an HR person with an office job would likely meet new employees one-on-one. Restaurants rarely have a similar structure. This support is one of the key reasons why Domenick Financial has proven indispensable to restaurants across the city.

“We only have a sign-up rate of about 25 to 30 percent,” Cahn says of Middle Child. “So I’m not sure paying for health insurance is the best use of that money. I could maybe just put all that money in a bank account and then when someone needs to go to the doctor, I could just pay for it. Or I could give everyone across the board a $2 an hour raise, or I could give everyone a $1,000 year-end bonus.”

But for Myers, Middle Child’s commitment to health insurance after her diagnosis helped her feel the restaurant industry was still a viable career option. When they decided to apply for the service manager position, Myers worked closely with Domenick to understand how much it would cost to get an insurance plan on the stock market that would cover their medical needs and allow them to staying with the same medical team. Myers was then able to factor that number into salary negotiations when they were interviewed for the promotion. This, Myers says, changed her perspective on her work.

“If I hadn’t been able to figure out how to get insurance and made that part of my salary negotiation, I would have just stayed on as a server,” Myers said. “The agreement we worked out around my insurance means I’m committed to the job for the first time ever.”

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