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Health Insurance with a Side of Fries

Posted on Apr 11, 2013 by Ailee Slater ()  | Tags: Affordable Care Act, Burger King, Fast Food Forward, fast food strike, Health Insurance, John Schnatter, KFC, McDonald's, New York minimum wage, obamacare, Papa John's, Wendy's, workplace insurance

In the world of health care, fast food is a common topic of discussion for its links to obesity, diabetes and heart disease. However, it turns out that fast food may be affecting the health of the United States in a different way altogether: by insuring, or not insuring, its employees.

On April 4th, the largest ever fast food workers' strike took place in New York City. Held outside the McDonald's restaurant on Times Square, this demonstration included 400 workers from Burger King, KFC, Wendy's and McDonald's. The strikers' message was simple: pay fast food workers more money.

In New York, the minimum wage is $7.25 an hour, but according to the Living Wage Project, the actual cost of living in New York City requires a salary of nearly $12 per hour. Organizers of the recent Times Square Strike, a group called Fast Food Forward, has found that the average fast food worker in New York takes home an annual salary of $11,000, whereas a CEO in the fast food industry will make $25,000 every day.

Adding to fast food workers' feelings of injustice is the fact that their low wages rarely include access to workplace health insurance. When insurance is offered, it can be subpar - according to CNN, the most common health insurance plan available to employees at McDonald's costs more than $700 per year while failing to provide adequate coverage for serious medical issues such as cancer or appendicitis. Fast food employees who are not given any access to insurance through their jobs will normally choose to forgo the purchase of insurance, and rely upon expensive visits to the Emergency Room if a medical need presents itself.

During the April 4th strike, the New York newspaper Village Voice talked with one striker trying to live on a fast food salary of $8 an hour, with no health insurance - this after working at the restaurant for over two and a half years.

Although it will do little to raise the salary of fast food workers, Obama's Affordable Care Act should help these and other low-wage employees by giving them access to health insurance. The Affordable Care Act stipulates that starting in 2014, all companies with more than 50 employees must provide these workers with suitable insurance. Failure to do so will result in a fine of $2,000 per employee, with a maximum penalty of $50,000.

Some fast food chains (and many other businesses) are less than thrilled about this insurance mandate. The Chief Financial Officer of McDonald's has said that covering employees' health insurance to the standard required by Obamacare would force every McDonald's franchise to spend an additional $10,000 to $30,000 per year. With around 14,000 franchises across the United States, this extra spending on health care could mean big financial consequences for McDonald's.

To mitigate the costs of providing all workers with health insurance, some fast food restaurants have vocalized plans to reduce employees' working hours: according to Obamacare, an employer does not have to provide insurance to anyone with fewer than 32 hours in one week. A report from the city of Omaha, Nebraska earlier this year told the story of local Wendy's chains aiming to cut the hours of all non-management staff down to 28 hours per week, in order to avoid rising insurance costs come 2014.

The Affordable Care Act's workplace insurance requirements will affect many businesses, but those in the service industry are of particular interest - according to a 2010 report from the Kaiser Foundation, a whopping one third of service industry workers, many of them in fast food, do not have health insurance.

One of the most famous cases of the food service industry's response to Obamacare came from John Schnatter, founder and CEO of the pizza chain Papa John's. At the end of 2012, Schnatter was quoted as harshly criticizing Obamacare for its insurance mandate; Schnatter went on to inform investors and customers that thanks to Obamacare, the price of a Papa John's pizza would increase by 11 to 14 cents per pie.

Many Papa John's customers replied by saying that they would be happy to pay a higher pizza price to help the company afford employees' health coverage. Indeed, according to a survey by Public Policy Polling in February of this year, 54 percent of Americans are willing to pay more for their fast food if they know that service employees are receiving health insurance.

John Schnatter has since come forward in favor of providing insurance to Papa John's employees, and has blamed media outlets for twisting his original words. In an opinion piece written for the Huffington Post, Schnatter explained that he only meant to emphasize the independent nature of Papa John's franchises, and to say that different bosses might make different decisions in order to cover the cost of complying with Obamacare. Schnatter also offered assurances that the chain was not planning to fire employees or cut down workers' hours, and that Papa John's would be covering the costs of new insurance premiums without raising the prices of pizza.

It is no doubt a delicate balance between encouraging business through financial incentive, and asking companies to spend a bit more money in order to create a healthier workforce. If employers decide to sidestep the insurance mandate of the Affordable Care Act by firing workers or reducing hours, those recent picketers at the McDonald's on Time Square might have lots more to say in the coming year.

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