Healthcare and The Building Trades
Let me start by saying that I am a dyed-in-the-wool believer in our version of capitalism. All the good, the bad, the ugly, I firmly believe it is the most efficient and fair system yet devised. I hesitated discussing this topic on a short blog post, but I firmly believe that healthcare is a distinct problem for us as an industry. I don’t have the answers, but I do know that the costs of the current system make providing health coverage to our employees increasingly difficult, if not impossible, to maintain.
Normally, when costs rise beyond a standard rate of inflation, the market generally sees an opportunity to earn money and fills that need with hospitals, outpatient care facilities, etc. Young people train as doctors, nurses and anesthesitists because the demand is so great. In essence, the void is filled by competitive forces and costs normalize over a period of time. If they don’t, and the cost of service outstrips the consumer’s ability to pay it, we have a healthcare version of a bubble bursting. This is how it should work. But something in the system is not functioning, costs rise annually well beyond inflation, and the losers are the business that pays all or a portion of healthcare coverage costs for their employees and the employees themselves.
Now that we have determined that I can see a giant brick wall crashing down around me, what is the solution? What have some of you done to lessen your healthcare coverage costs, or at least ease the insatiable rate increases? A construction company, billing $45/hr. or so for skilled tradesman does not have the additional revenue to absorb double digit percentage increases yearly. In this market of declining revenue, the simple solution is to drop coverage for your employees. This can cause a downward spiral effect as quality employees leave for locales that offer health coverage. Not a pretty picture from any vantage point.
Some firms are exploring Health Savings Accounts (HSA’s) and Health Reimbursement Accounts (HRA’s). In effect, these are high deductible plans with a fairly substantial co-pay. In the HSA, the employee keeps the funds in the account at the end of the year, in the HRA the employer keeps them. Folks in our industry have told me that these work well for construction firms where the majority of workers are under the age of 35 and in relatively strong health.
Other firms I have spoke with have joined forces with groups in order to leverage purchasing power. Perhaps the local Home Builder’s Association has an option availabe. In any regard, providing coverage is increasingly expensive, and many of our brethren in the industry, through no real choice of their own, have to opt out of providing coverage to their employees. We all lose in this instance. Our best and brightest will not stay with us for long without a competitive benefit package.
In short, please explore all available options (Group plans; HMO’s; increase co-pay; HSA’s or HRA’s) before eliminating the benefit altogether. Keep open lines of communication with your staff. Examine your plan yearly and shop it competitively. Some employees may be willing to fore go a raise in order to keep their premiums affordable. Our national healthcare system is in trouble. Our ability to stay a worthy competitor for bright young talent hangs on our industry’s ability to provide good pay and benefits, along with quality of life issues. I personally don’t believe a socialized medical system is the solution. But I also know that high single digit or double digit annual cost increases are simply not sustainable and will cripple our industry.
What have some of you done to provide this benefit affordably to your staffs? I, and many others I will assume, would love to hear any and all options available to us.
Tags: Healthcare, HSA, manageemnt, small business
August 27th, 2009 at 4:23 pm
These rising healthcare costs have been an ongoing trend over the years. Three months ago I had to cut our health benifits for the companys managers. Although I did get some much expected negitive feed back from them, they did understand and opted to get plans of their own. Believe it or not, their plans are acually less expensive than the company plans we offered. All managers got increases in their salaries this year and they know during these hard economic times the company needs to make cut backs. As it was said in the artilce above, keeping open lines of communication with your employees is very important. My perogitive on it is letting them know when profits do go up again, their healthcare benifits will be reinstated. I think its also important that all employees realize that just having a stable position with a company these days is more of a privlage than anything else. We are in the landscape installation and maintenance industry and these days there are not many employers in our area offering healthcare other than to their top one or two managers. Leaving a company in hopes that healthcare will be provided is not always a good option because it most likely not available. Obviously health insurance is a huge benifit at the place of work but I am a small business owner in an industry that is filled with owners that will work for very small profits if any. To remain competitive we have been forced to decrease our labor rates lower than they have been in six years. My managers and I have a once a week meeting to discuss upcoming projects, schedualing and most important, areas where we can upsell and make additional revenue for monthly billing. When your employees posess a personal interest in the company, understand the local economy and want to continue their climb up the ladder of prosperity; they should understand when they hear “the company needs to cut back on some expenses for a short duration of time. Its not the ideal situation but the healthcare costs are just to great right now. We do however plan to reinstate when the economy bounces back”. Unfortunatly the list of cutback areas is not long. We are a maintenace company and really don’t use any outside service providers. We need to remain steady in our advertising, monthly utility, insurance, employment, auto and equipment costs. The easiest and largest bulk of expence that can be cut is healthcare.
August 27th, 2009 at 9:00 pm
I’m understanding you are not for a public option as you consider this socialized medical. What are your thoughts on State funded workers comp insurance plans?
August 28th, 2009 at 2:09 pm
I think your situation is more typical than atypical, Steve. Especially in a down market, it is next to impossible to charge enough money or produce enough volume to cover this expense. An employee mandate wouldn’t help, either. Additional revenue won’t appear out of thin air and we will be forced to go forward with fewer employees. As you well know, there is no simple answer to this problem that has vexed us for years.
I certainly appreciate your taking the time to share your story! Keeping open lines of communication with your managers and staff is important – and the employee buy-in you mentioned is critical to a business in both good times and bad. It sounds like you have it in spades, and for that you should be commended.
August 28th, 2009 at 2:18 pm
Hi Bill:
Thanks for your response.
I would like to see more cooperatives, and I would like to see more involvement on the state level in health insurance programs. In Georgia, we have a program called Peach Care that is a subsidized lower cost insurance for children with certain income limitations on the families. Of course this is under enormous financial pressure with the current reduction in tax revenues. In any regard, double digit yearly increases for medical coverage are killing our small businesses in many industries.
Could you tell me more about state funded worker’s comp? I am not understanding your question.
March 23rd, 2010 at 9:42 am
Interesting writing. I was looking for a few differint things, this seemed to sum it up well. Added to my bookmarks.