The Fraught Path of Restaurants Trying to Provide Worker Healthcare

In July 2016, Jerry Teigen, co-owner of West Hollywood's WeHo Bistro, was diagnosed with liver cancer.
In July 2016, Jerry Teigen, co-owner of West Hollywood's WeHo Bistro, was diagnosed with liver cancer.
Courtesy Jeff Doudek

In July, Jerry Teigen, co-owner of WeHo Bistro in West Hollywood, was diagnosed with liver cancer. It was the first time Teigen and his husband/co-owner, Jeff Douek, had been forced to navigate the American health care system. "It's hard enough to be sick, and hard enough trying to get better," Douek says, "but we didn't have to think much about it. We could do what we wanted because we had health insurance."

This luxury — the emotional freedom that comes with being insured — got them thinking about the health care needs of their restaurant staff, which includes fewer than 20 employees. After speaking with their employees, they discovered that nobody working for them had health care. So what would happen to them if they got sick or hurt and couldn't work, the couple wondered. "We saw how much this was costing and knew we had to explore options," Douek says.

Douek and Teigen offered to bring the employees into a group plan they constructed with the help of their insurance company. To help defray the cost and get their employees covered, they offered to pay the first $100 monthly for those who bought into the plan; employees then would have to cover the rest on their own. But even after subtracting $100 each month, the health care bill was too large for almost everyone. "Only one [employee] was able to buy coverage," Douek says. "Everyone else isn't covered."

Then, after a six-month fight with cancer, Teigen died this past December.

Due to the frustration he felt during his last months as he tried, and failed, to bring health care coverage to his workers, Teigen decided to leave half of his ownership share in WeHo Bistro to his employees. In addition, he donated $10,000 that will be used for emergency health care for his employees; Douek is hopeful that donations from friends and family will further expand the fund. "At least our employees will know something is there for them," he says.

Jerry Teigen, right, co-owner of WeHo Bistro in West Hollywood, and his husband/co-owner, Jeff Douek
Jerry Teigen, right, co-owner of WeHo Bistro in West Hollywood, and his husband/co-owner, Jeff Douek
Courtesy Jeff Douek

For Los Angeles restaurants, the path of providing health care to employees can be fraught with confusion and exasperation. Even before the current presidential administration put health care in the political crosshairs, restaurants have faced difficulties providing insurance for their employees. Sometimes these attempts are motivated by more than simple kindness or even the financial penalties associated with the Affordable Care Act's coverage requirements — providing health care may be necessary to attract and retain quality employees.

"We wanted to have a grown-up business," says Josh Loeb, co-owner of Rustic Canyon, Sweet Rose Creamery, Milo & Olive and Huckleberry Cafe. "People getting benefits, being paid well and, for us, providing health care."

To get a sense of what premiums and benefits were needed for his workers to buy into group coverage, Loeb asked his employees. He soon realized that if the employees had to cover any of the costs, they'd mostly choose not to get health insurance. "A lot were hesitant to sign up, even with the penalties of Obamacare," he says. Loeb then devised a way to offer fully paid premiums to employees by adding small surcharges to customer bills. "We wanted to make sure everyone knows the people working in the restaurant are fully covered." On Sept. 1, 2014, a 3 percent surcharge began showing up on bills at Loeb's restaurants. And for the most part, customers didn't seem to mind, he says.

Other restaurants did the same. Bill Chait, co-owner of République and Bestia, implemented the same surcharge in his restaurants earlier in the year. In the Bay Area, many San Francisco restaurants have been adding a health care surcharge since 2008. Using those San Francisco locations as templates, other L.A. restaurants — including Mélisse, Lucques and the Hungry Cat — began adding the same 3 percent surcharge to help cover health care costs for their employees. For many, this was the next logical step to account for the rising cost of coverage.

Kitchen crew at Rustic CanyonEXPAND
Kitchen crew at Rustic Canyon
Anne Fishbein

"We started doing insurance for the employees six or seven years ago," says David Lentz, chef-owner of the Hungry Cat. "We made the decision because we were doing well and could afford it."

Lentz instituted a tiered system, dependent on role. Managers got all their coverage paid for, while other staff were offered a 50/50 split. Things were going smoothly before passage of the Affordable Care Act forced Lentz to offer mandatory coverage, which raised prices.

"We were looking at costs out of the gate of $60,000 to $70,000," Lentz says. "We can't just find this extra money to put toward insurance." So he decided to go with a surcharge as well. "Three percent does not cover 100 percent of the cost, but it mitigates it a little."

It did for a while, at least. About a year after the surcharges were introduced, a class action lawsuit was filed against the restaurants, alleging they had conspired to violate price-fixing and collusion laws. "Under California law, competitors cannot get together and agree to increase the prices of the goods or services," Daniel Sterrett, San Francisco attorney representing a plaintiff, told CBS2 in 2015. The lawsuit also named restaurants Animal and Son of a Gun, although neither has implemented a surcharge, because their owners, Jon Shook and Vinny Dotolo, allegedly encouraged other restaurants to implement the surcharge. Owners of the accused restaurants were unable to answer L.A. Weekly questions about the suit due to pending litigation.

According to the National Conference of State Legislatures, a bipartisan organization that promotes policy communication between state legislatures, incomes in the United States are not keeping up with the rise in health plan costs. This means a greater percentage of earnings is being taken by health care coverage. (In 2006, health care costs took up 6.5 percent of a person's income, but by 2015, that number had risen to 10.1 percent.) The money's going somewhere, and most of the time, it's not going to those buying the plans.

"These insurance companies just continue to make money, because there's no regulation," Lentz says. "They're the ones making the money, we're the ones that have to pay it."


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