Young people want to work for employers that offer benefits. According to a survey from Georgetown University, health insurance is one of the most important factors when considering whether to change jobs. But for young workers on limited incomes, employer-sponsored healthcare must also be affordable.
This all adds up to a serious challenge for restaurant owners. A restaurant’s staff is often made up of young people just entering the workforce, and the restaurant’s success could depend on their ability to hold onto employees that are notorious for changing jobs. But enrollment in traditional group health plans is often low among restaurant employees, which turns healthcare renewal into a vicious cycle: plans are too expensive, so fewer people participate, which in turn leads to year-on-year price increases as the risk pool shrinks.
Leblon Franchising Holdings, a franchisee based in North Carolina with 23 Popeyes restaurants across the Southeast, felt the pain of that cycle. Going into 2024, United Healthcare quoted Leblon a staggering 50 percent price hike, justified by low participation and high usage among their employees. This marked a turning point—Leblon needed a new approach to benefits.
To break that cycle of price hikes, Leblon turned to the individual coverage HRA (ICHRA).
Affordable benefits from entry-level to executive
In a traditional group plan, entry-level employees are offered the same benefits as chief executives, despite the differences in income. A cashier earning minimum wage is unlikely to have the same healthcare needs or budget as a C-level executive. Many lower-income employees are forced to choose between enrolling in a plan that exceeds their budget or simply going without coverage.
With ICHRA, employees choose and buy their own insurance using an allowance set by their employer, either on healthcare.gov or a state-based exchange. That mode gives employees the freedom to choose a plan that meets their needs—and their budget.
With ICHRA, restaurant owners can break the connection between participation and renewal rates. There are no participation requirements, and costs remain stable even if uptake is low. Employers have total control over their healthcare spend: they set a per-employee allowance and decide whether to increase or decrease that amount each year.
Once Leblon’s director of human resources chose ICHRA, the company stabilized what used to be the most unpredictable line item on their budget. Leblon sets its own reimbursement costs for each employee, and they can hold those figures steady even when individual employees renew their plans each year. As a result of the company’s savings on health insurance, the HR director received a bonus for the first time in her career.
For employees, ICHRA means getting the right level of coverage. Young, entry-level staff might choose a low-premium, high-deductible plan that supports both their budget and their medical needs. Employees with greater healthcare needs, or those that can afford to spend more out of pocket, can select more comprehensive coverage. Most importantly, an employee’s individual choice has no impact on the options of their coworkers—everyone can choose the best plan for their needs.
Increased employee retention and hands-off HR administration
Even the most successful restaurants struggle to recruit and retain workers long-term. For restaurant owners already dealing with inflation’s impact on supplies, payroll, and rent, turnover is an expense they cannot afford. The average annual turnover cost is $36,295, a 2024 Express Employment Professionals-Harris Poll survey found, and one in five businesses report costs exceeding $100,000.
Offering an attractive benefits package is one way for employers to reduce turnover. However, group healthcare plans are often prohibitively expensive, and restaurants rarely have HR departments to handle employee questions. ICHRA can help on both fronts.
For new restaurants, or restaurants new to benefits, ICHRA reduces the amount of time businesses spend managing benefits. By shifting ownership of each policy to the employees, an HR team is no longer responsible for negotiating rates or resolving individual issues.
From single-location cafes to bustling chains, restaurant owners across the country can achieve budget stability with ICHRA. Employees at every location and every level of the organization can access quality coverage. The result? Happier, healthier staff—who are more likely to stick around.
Jack Hooper is the CEO and co-founder of Take Command, a Dallas-based SaaS company that offers health reimbursement arrangement administration. Jack is a founding member of the HRA Council and has served as Chairman of the Board. He is a graduate of the Wharton School of Business and has been featured in The New York Times, BenefitsPro, Dallas Morning News, Bloomberg, and more.
