Restaurants Face Tough Decisions on Health Insurance

By McCart, Melissa | Pittsburgh Post-Gazette (Pittsburgh, PA), November 17, 2013 | Go to article overview

Restaurants Face Tough Decisions on Health Insurance


McCart, Melissa, Pittsburgh Post-Gazette (Pittsburgh, PA)


Tolga Sevdik, a co-owner in two Downtown restaurants -- Butcher and the Rye and Meat & Potatoes -- now has health insurance.

But like so many restaurant workers, he went years without coverage, even while working as a manager of a club in the Strip District.

It was a costly move. An appendicitis attack landed him in the hospital. And with it came a bill more expensive than a year at a private college that he's still paying off.

That experience is partly what prompted Mr. Sevdik and his business partner, chef Richard DeShantz, to offer health insurance to their employees. "I don't want the people who work for us to end up in a similar situation," he said.

Traditionally, small to mid-sized restaurants have been selective in whether they offer health insurance because it's expensive and restaurant profit margins are low. Some places offer it for management while others extend it to cooks.

Yet as more restaurants compete for staff in Pittsburgh's shallow applicant pool, health insurance is being offered as an incentive to stay longer, reducing the short workplace tenures and employee churn that are part of the restaurant industry culture.

The behemoth on the horizon is the Affordable Care Act, also known as Obamacare, with an encroaching deadline in January 2015. While this may seem far off, it's already shaping restaurant employment practices.

So while employees jockey for the position that affords them the best salary and benefits, restaurants are scrambling to understand how the changes will affect their bottom line.

According to the Affordable Care Act, restaurants that employ 50 or more full-time employees -- defined as 30 hours a week or more -- will be required to pay for health benefits. If they don't, they'll have to pay a $2,000 penalty per employee after the first 30 workers. Obamacare also mandates that the premiums employers pass on to employees can't exceed 9.5 percent of an employee's household income.

Mr. Sevdik and his restaurants are staying ahead of the law; they're offering health benefits to employees who work 30 hours or more a week once they have been employed for 90 days.

"We're trying to run like a corporate place," he said. "It's so hard to find good employees in Pittsburgh. One way to secure them is to make sure they're covered."

For the past year Meat & Potatoes has covered 100 percent of management's insurance premiums and 50 percent of full-time staff insurance premiums, which translates to $66 a month per employee. These benefits will be extended to workers at the newly opened Butcher and the Rye by January 2014.

Under Obamacare, employee contributions could change, although Mr. Sevdik is not yet sure how. "It's pretty confusing," he said. "I get emails about compliance from my insurance broker once a week." Employers will eventually have to structure their health offerings so that an employee's maximum "out of pocket" expense would be capped at $6,350 for the year, or $12,700 per family.

Restaurants that haven't yet aligned with the Affordable Care Act requirements are anticipating they'll be hit hard, particularly local mid-sized restaurants such as those run by Brian Pekarcik, chef and partner of Spoon as well as BRGR in East Liberty and Cranberry and Grit & Grace to open next month Downtown. …

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Restaurants Face Tough Decisions on Health Insurance
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