An Atlanta restaurant took some heat on social media after it added a 4% health insurance fee to customers’ bills, but it wasn’t the first and likely won’t be the last.
said restaurant owner Emily Chan CNN The fees cover almost all employee health insurance costs. “We feel like there is a very big crisis happening in health insurance,” she told the media. “No one can afford it.”
In fact, one employee said he simply didn’t get health insurance the year before he started working at the restaurant.
But restaurant owners adding surcharges to employees’ health insurance is nothing new. Early last year, a patron at a Los Angeles restaurant went viral after suggesting she was charged an additional 5% on her bill for “employee health.” Commenters were angry that a restaurant expected customers to cover employees’ health insurance, according to A.J Today.com a report.
These fees have become more common during the pandemic, along with so-called COVID-19 fees, which were reportedly intended to cover the cost of personal protective equipment and other pandemic precautions, according to another. Today.com a report.
But restaurants began charging extra to cover health insurance costs as early as 2008, according to a report The New York Times. The fee was reportedly in response to a new San Francisco law requiring businesses with more than 20 employees to cover some health care coverage costs. Notably, the Affordable Care Act—passed in 2010—set national requirements to provide health insurance benefits to 50 employees.
Similar stories have emerged over the years, with the practice seemingly spreading even in the face of customer complaints.
However, only 32% of people working in food services earned health insurance benefits through work, according to 2023 data from the U.S. Bureau of Labor Statistics (BLS). This represents a decrease from 35% of food service workers in 2019 and 2020.
said Matthew Notwidegdo, MA, PhD, of the University of Chicago Booth School of Business MedPage Today These fees are likely a result of the tight labor market in the restaurant industry that has emerged in the wake of the COVID-19 pandemic.
“There is a constant labor shortage, especially in this sector, and as a result you have to pay your workers more,” he said. “Many restaurants have chosen this, rather than choosing to raise their menu prices.”
“I think what you’re seeing is that this restaurant figured out that there was a way to raise prices without a lot of consumers noticing,” Notwidigdo added. “The risky part about this strategy is that every now and then some consumers notice it, and they get really upset.”
Notowidigdo noted that customers tend to be upset by these fees because they are not affected by the expected cost of these services.
He noted that claims that the fee is for employee health insurance benefits are likely an attempt to make the fee seem less objectionable, adding, “We’re recovering from the pandemic. … Why wouldn’t you want to pay them a little bit more so they can afford health insurance?”
These types of charges will likely continue to appear on restaurant bills as owners try to adapt to the restaurant industry’s unique hiring environment, he said.
“In the last two years, low-wage workers in the low-wage labor market have done well,” Notwidegdo said. “They got wage increases, and that made it harder for employers who used low-wage workers to compete.”