Restaurant health care 101

Wondering how to offer health insurance to your employees? Check out these health insurance basics for restaurant owners.

Offering employees health-care benefits can set you apart from competitors who don’t, making your operation a more desirable place to work. A good first step as you explore what’s involved in the process is to find a broker, preferably one with experience setting up plans for restaurants your size.

When it comes to offering insurance, there are rules that apply depending on whether you’re a large or small employer. If you’re what’s called an “applicable large employer,” which is any company or organization that has an average of at least 50 full-time or full-time-equivalent employees (FTEs), the Affordable Care Act requirements apply to you. For the purposes of the ACA, a full-time employee is someone who works at least 30 hours a week or 130 hours a month.

If you have fewer than 50 full timers (full time plus FTEs), offering a health-care benefit plan is not subject to ACA requirements; it’s just a good idea.

Under the Affordable Care Act...

As a restaurant operator, am I required to offer my employees health insurance?

  • 50 or more full-time or full-time-equivalent (FTE) employees: Yes. Again, a full-time employee averages at least 30 hours a week in any given month, or 130 hours a month.
  • Fewer than 50 FTE employees: No, unless you are in Hawaii.
  • Seasonal workers: Generally no, although you must include part-time and seasonal workers in your count of FTE employees. A seasonal employee, according to the Internal Revenue Service, is a person hired into a position for which (1) customary annual employment is six months or less and (2) the period of employment begins each calendar year in about the same part of the year, such as summer or winter.

Do I need to offer coverage to my employees’ families?
If you employ 50 or more FTE employees, you must offer coverage to full-time employees and their dependents (children up to age 26). You are not required to cover employees’ spouses.

What happens if I don’t offer insurance?
If you employ 50 or more FTEs, and you don’t offer minimum essential coverage to at least 95 percent of them and their dependents, you will have to pay a penalty to the IRS called the employer shared responsibility payment. If even one of your full-time employees goes ahead and gets a federal tax subsidy to buy a health plan through a Health Insurance Marketplace on, the IRS can come back and fine you $2,000 per for each of your eligible employees (although the IRS excludes the first 30 full-time employees from the count).


In general...

Who pays the premiums?
Employers pay varying portions of the premiums, but the minimum is 50 percent, says Joe Mowery, vice president, employee benefits, with Hylant, Orlando, Fla. If they are a large employer, they must pay enough of the subsidy to render the remainder “affordable” under the ACA, meaning it costs a full-time employee 9.78 percent (for 2020) or less of the employee’s household income.

How many of my employees have to participate in my plan for me to keep the premium rates I’ve been quoted?
Approximately half to three-quarters of employees who are offered the benefit need to sign up for it. The insurance provider will dictate the participation rate.

What happens when an employee who was on my plan leaves?
You must notify the employee of his or her right to continue health insurance under COBRA. The employee pays the full premium cost, plus 2 percent.

Will offering health insurance help me recruit or retain employees?
Usually, it will, says Mowery. It can help you compete for good workers, especially at the manager level and with mature workers. Younger, healthier workers may be less interested, but even they can save on prescriptions and routine care.

Can I get help paying for health insurance?
A Small Business Health Care Tax Credit can cover up to 50 percent of your cost of providing insurance if

  • you have fewer than 25 FTEs who each earn on average less than about $55,000 annually each (this amount adjusts up for inflation every year)
  • you pay more than 50 percent of the premium
  • you offer it to all full-time employees
  • you buy the policy through the Small Business Health Options Program (SHOP). Use the Small Business Health Care Tax Credit Estimator to see if you qualify.

Choosing plans:

What kinds of health insurance coverage should I offer?
Consider offering multiple options at different price points — not just one plan, says John Pask, co-founder and managing director at GoBenefits in Dallas. Young, healthy workers may want a high-deductible health plan (HDHP) with lower premiums. Workers who frequently use medical services may want lower copays, which carry higher premiums.

Look at what your competition offers, adds Mowery.

Does the insurance have to cover things like prescriptions, maternity care, or hospital visits?
If you are a large employer, the coverage you offer must have a “minimum value” and cover 10 essential health benefits to avoid the employer shared responsibility penalty. It also must be “affordable.” If you are not a large employer, you still want your benefits package to be competitive.

Should I investigate dental and vision coverage?
Yes. Dental and vision insurance are often easy add-ons to medical insurance, says Pask.

How else can I save money?
Explore a base plan that lets employees “buy up” for more coverage. For example, a Health Savings Account-qualified plan can be a good base plan; plans with lower deductibles — which are more expensive — can be offered as a buy up. Another option could be a plan with a narrow provider network, those with a smaller selection of healthcare providers “in network.” These are usually less expensive and can be a good base plan. A plan with a broader provider network can be offered as a buy up.

Look into an Association Health Plan such as the Restaurant & Hospitality Association (RHA) Benefit Trust if you have 6-50 eligible employees. For more ideas, listen to The Health Plan Edge Podcast, Episode 5.

Are there new health-care plan options?
Starting Jan. 1, 2020, employers of all sizes can offer an Individual Coverage Health Reimbursement Account (ICHRA). Your tax-deductible funds let employees buy insurance on the public exchanges. Watch “More Savings, Less Time: How New Health Policy Rules Can Benefit Your Business” for details.


Choosing providers:

Is there a plan made just for restaurant operators?
Yes. National Restaurant Association members with a hospitality group with 6-50 eligible employees can explore the Restaurant & Hospitality Association (RHA) Benefit Trust, an Association Health Plan.

What other resources can help me choose a plan?
If you are a small employer, typically with 2 to 50 employees, the SHOP in your state lets you compare prices from multiple insurers side by side. You can also check with a single health insurance provider.


Starting coverage:

What is open enrollment? When does it happen?
An operating business can offer a health insurance program to its employees at any time during the year. Many companies will start open enrollment in the fall to get employees enrolled for a January 1 start date. Learn more about how to improve participation in the open enrollment process here.

How long does it take to set up a health care benefits package:
When setting up a plan, give yourself a good 60 to 75 days to work with your broker to select an insurance provider, set up and communicate the plans, let employees sign up, and start coverage. Here’s a little bonus tip: Once you’ve set up a health-care benefit plan, pad the “official” enrollment deadline you give employees by at least two weeks to track down missing information on enrollment forms. You’ll need gather each employee’s name, date of birth, home zip code, dependents info, occupation, and annual compensation.