Jack Will Spring for Health Coverage
A decision by Jack in the Box Inc. to offer healthcare coverage to hourly workers that was announced last week came two weeks after California voters rejected a ballot measure that would have forced the company to do just that.
If Proposition 72 had passed, businesses with 50 or more employees would have had to provide them with health insurance and pick up 80% of the premium or pay into a state-run plan. The measure was opposed by many California restaurants -- including Jack in the Box.
Executives of the San Diego-based company said Proposition 72 had nothing to do with their breaking with the fast-food pack and offering coverage to 32,000 hourly workers. They declined to say, however, how much of those workers’ premiums the company would cover.
That left healthcare experts at a loss to grade the Jack in the Box effort. “Without knowing how much employees are contributing, it’s hard to assess whether or not it’s a good deal,” said Lynda Ford, president of the Ford Group, a management consulting firm in Rome, N.Y.
But anything is better than nothing, industry analysts and backers of employer-sponsored health coverage said.
“Doing nothing is the norm,” said Hal Sieling, a restaurant consultant in Carlsbad, Calif. “It’s a good idea for them to be leading the pack.”
Restaurants, which suffer high employee turnover, are less likely than hotels or retail stores to provide health benefits to hourly employees, according to results of a survey published this year in Chain Leader magazine. The offer of health benefits could reduce turnover and trim costs at Jack in the Box, which spends an average of $1,000 to recruit and train a crew member.
“Healthcare coverage is important to more and more people,” said David Leach, managing director of ECG Advisors, a compensation consulting firm in Los Angeles. “It could certainly help them with recruiting.”
Under the Jack in the Box plan, which takes effect Dec. 1, the company will pay a portion of the premiums for part-time and full-time employees who have been on the job at company-owned restaurants for at least one year. Workers who have been with the company for less than a year will have access to the plan but will have to foot the bill for the entire premium.
Jack in the Box declined to reveal premium amounts or the total cost to the company. But Robert Nugent, its chairman and chief executive, said a reduction in turnover of one-tenth of 1% would cover the tab.
“We feel very, very comfortable that we’ll get that result,” Nugent said during a conference call with Wall Street analysts last week.
Jack in the Box already offers health benefits to employees in shift-leader positions and above. Expanding access to healthcare meshes with Nugent’s philosophy that developing satisfied, tenured employees who offer better customer service can affect profit.
Nugent touted the company’s program to offer insurance to restaurant employees as the first of its kind among major fast-food restaurant chains.
Wendy’s International Inc., for example, doesn’t offer health benefits to workers at its Wendy’s restaurants in California. Irvine-based Taco Bell Corp. offers health coverage to part-time and full-time employees, but the workers must pay the premiums themselves.
A McDonald’s Corp. spokesman said the company offered healthcare benefits to hourly employees at company-owned U.S. restaurants and paid a portion of the premiums. But the spokesman said he didn’t know whether that was the case at the restaurants that are independently owned and operated; those are the vast majority, some 80% of 13,500 outlets.
By comparison, 78% of Jack in the Box’s 2,006 outlets are company-owned. Employees at these restaurants will be able to choose from three options, starting with a basic health insurance plan. Two enhanced plans with higher premiums will include limited coverage for prescription drugs, outpatient surgery and inpatient hospital visits. For an extra fee, dental and vision benefits will be available under any of the plans.
The basic plan features no deductibles or co-payments and includes annual maximum limits of $300 each for preventive care, specialist office visits and emergency services for each covered individual. The company is offering both family and individual coverage.
Once coverage limits are exhausted, plan members can continue to seek treatment at reduced prices.
“We think up to 10% of previously uninsured crew members could enroll in the plan,” said Brian Luscomb, a Jack in the Box spokesman.
Juan Parada, the manager of a Jack in the Box restaurant in Echo Park, credited the health benefits with improving morale among employees.
“Some have already signed up,” Parada said. “It makes them feel important.”
One human resources expert described the plan as positive, although not revolutionary.
“This type of plan is not unusual for businesses with high turnover,” said Ron Mason, a principal at Towers Perrin, a benefits consulting firm.
Jill Yegian, director of health insurance programs for the California HealthCare Foundation, a philanthropic organization in Oakland, said the Jack in the Box plan appeared to have “some very useful features for employees who are lower-income. It will help them get access to the services they need.”
Added Peter Warren, spokesman for the California Medical Assn., a supporter of Proposition 72: “Anytime an employer wants to take on some of the burden of working with their employees to cover healthcare, that’s a good thing. It broadens the risk pool and it reduces the cost to the rest of us.”
