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Desperately Seeking Solidarity: Health
Care Crisis Plagues Industry
AConstruction firms are being hit
hard by rising health-care insurance costs as AGC chapters
scramble to find solutions
By Mary Buckner Powers
 Rising
health care costs and correspondingly higher insurance premiums
are on every worker's and employer's minds these days. Premiums
are up nearly 60% since 2000 and small businesses, including
contractors, have been hit the hardest, with costs that are
about 17% higher than larger companies, according to the National
Bureau of Economic Research, Cambridge, Mass.
Associated General Contractor chapters across the country
are trying to help their members address rising costs through
multi-employer group health-care insurance. There is no universal
solution, however, because state law governs these group plans.
Even groups covered by federal law, including labor unions,
face rising premiums. "Last year, a disproportionately
large part of the total union wage package ended up in health
care," says Robert M. Gasperow, executive director of
the Construction Labor Resource Council, Washington, D.C.
"It's causing a terrific strain in collective bargaining."
Health care contributions in construction collective bargaining
agreements average $4.82 an hour for each worker-about 8%
of the average total wage-fringe package of $38.65. Like AGC
group insurance plans, union health care plans are fragmented.
"Every craft in every city has its own plan. That appears
to be the problem," says Gasperow.
For contractors, the fragmentation is caused by different
state requirements and definitions, as well as opposition
from the insurance industry to some group plans. Insurance
companies do not want people joining together in a group just
for the purpose of buying insurance because it is an underwriting
risk, says one insurance specialist. "But each state
law has its own definition of what a group is, and its own
laws governing the groups," says the specialist, who
asked not to be identified.
In New York, everyone in a group insurance plan with fewer
than 50 members pays the same premium for coverage, whether
they are healthy or sick, young or old. Other states, such
as Oregon, require that groups also offer mental health coverage
equal to other medical coverage.
California has a prevailing wage law, which has made it easier
for contractors to bind together. In San Diego, there are
a large number of contractors that are not affiliated with
unions, so the health care insurance plan offered by the AGC
chapter there runs parallel to union plans. Insurance premiums
are based on the prevailing hourly contributions for health
care under the law, which covers all state-funded construction.
"It sets a level playing field to provide benefits,"
says James Ryan, executive director of the San Diego AGC chapter.
 Another
key to the San Diego chapter's success is the members' day-to-day
involvement in the plan. "It needs an energized group
of contractors to oversee it. You can't just get an insurance
agent to set up a trust. Without the [contractors] involved,
it simply won't work," says Ryan.
Oregon is a prime example of how an an AGC chapter with a
health insurance plan that was slowly dying turned it around,
says Craig Honeyman, executive director. Premiums were going
up 25 to 30% each year before the chapter changed administrators
and carriers three years ago. "Premiums are still rising,
but not as quickly," he says.
Oregon hired Thinc, a Portland-based benefits and consulting
company that specializes in multi-employer associations to
help it pull the plan out of its death spiral. "It was
having difficulty as so many association plans do," says
Margaret Huling Thinc's director of marketing.
The old program was not well marketed, says Huling. "Programs
need new companies entering the plan at all time," she
says. Thinc created a network of agencies throughout the state
that were trained in benefits and how to sell them. Now there
is continual growth in the plan, she says.
Healthier Risks
Another problem the new administrators addressed was membership.
"We don't let AGC affiliate members join the plan if
they are not in a construction-related trade," says Huling.
The goal is to create a healthier risk pool.
Contractors, suppliers and material manufactures are in,
but construction lawyers, insurance agents and other white-collar
affiliate members are out. "Blue collar workers are usually
a healthier risk for carriers because they do physical work,"
she says. Thinc has developed a plan that offers members 14
choices. "That's a huge number for small businesses,"
says Huling.
The Oregon plan sets insurance premiums high enough during
the peak construction season in order to cover workers during
the winter months when when they may not be working.
Developing group plans is not the only problem facing AGC
chapters. Tackling rising health care costs, which lead to
higher premiums, is an even tougher job. "The problem
is there is no one person to [go after] to make it better,"
says William Brown, vice president and general counsel, Administrative
Services Group, Lexington, Ky., which administers AGC health
care plans in Kentucky and Kansas.
 All
parties involved add to the problem. "There are employees
with unreasonable expectations of benefits, employers trying
to balance the most benefit for the least amount cost to them,
state and federal governments that are trying to shift Medicare
and Medicaid cost overruns to the private sector, drug companies
that advertise, doctors who practice malpractice prevention
medicine and insurance companies who negotiate secret prices
with providers," says Brown. Ultimately, the most difficult
issue is that 20% of a group population spends 80% of the
health care dollars, he says, adding: "We need those
80% to stay in the system to pay for the 20%."
One way to reduce costs is to slim down usage of the health
care system by workers and their families, which can be done
through education, say AGC officials. In Idaho, AGC is helping
consumers understand the correlation between how much an insurer
pays out for health care and how much they must pay in premiums.
Consumers are learning that lesson on prescriptions, says
Michael Gifford, executive vice president of the Idaho AGC
chapter. Instead of a copayment, members now pay 10% of the
cost of generic drugs and 50% for brand names. "Give
consumers economic consequences, and they change their behavior,"
he says. Preapproval by the insurance company now is required
for expensive tests, such as MRIs. "Medical tests that
aren't necessary are a huge part of the premium problem,"
says Gifford.
Idaho is offering plans with higher deductibles as a way
to reduce premiums. Raising deductibles from $600 to $1,000
can cut premiums by 15%, says Gifford. Higher deductibles
through health savings accounts also help educate consumers.
They can get $5,000 deductible plans plus several hundred
dollars from their employers to pay for some medical expenses,
and they can keep what they don't spend. That plan can reduce
premiums up to 30%.
Idaho and Oregon, like many state AGC health plans, have
multiple rate categories so low-risk companies are not subsidizing
those with higher risk. If everyone were charged the same
price, the lower-risk members would drop out of the group
health plan, says Gifford. "There is no 'one-price-fits-all,'"
he says. "There was a day when we could pull that off,
but we can't now because of the rising premiums."
AGC of Kentucky faces a different threat from small group
members with high-risk employees. A new state law allows insurers
to put high-risk individuals into a high-risk pool, but employers
have to cover everyone equally. The law could devastate the
state group plan by encouraging members with high-risk employees
to drop out.
The chapter is working to set up catastrophic health insurance
to reduce premiums, but contractors are still quitting the
plan, says Eric Highley, executive vice president. "I
see health care as killing our industry. Our members are no
longer competitive with other employers who offer better benefits,"
he says. "We have to stand together to fix the problem."
A Little Help from the Feds?
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