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Published: October, 2004; Vol 1, Num 5

 

RISING Health Care Costs Squeeze Union Sector

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LIUNA General President Terry O'Sullivan

“Union construction is caught between a rock and a hard place,” says LIUNA General President Terence M. O’Sullivan, reacting to a report last month that the cost of providing health care to employees in the United States has risen 11.2 percent in 2004.

The report, prepared by the well-respected Kaiser Family Foundation and Health Research and Education Trust, is based on an annual survey of 3000 companies.

“In America, health care traditionally is part of a worker’s compensation package,” O’Sullivan explains. “Along with good union wages, it’s what allows Laborers to be part of the middle class. In our industry, through collective bargaining, employers contribute to jointly managed health and welfare funds that, in turn, purchase and provide health care coverage to our members.

“However,” O’Sullivan continues, “as health care costs soar to record heights, our contractors are squeezed. They can’t sustain both increased contributions and meaningful wage increases. To a large extent, all of us – contractors and Laborers, alike – are forced to choose between higher wages and continued health care coverage.”

In Canada and most other industrialized nations, the problem for union labor is not so acute because health care coverage is provided in whole or substantial part by the government. Though costs are rising in these nations, they are absorbed by the state and, thus, are not pitted against wages in collective bargaining.

In the U.S., however, non-union companies that choose not to support health care for their employees can choose, instead, to raise wages and, on that score, improve their competitive position among workers who believe they can do without health care – in particular, younger workers without families and dependents. Thus, the American system of privately-financed health care works against union contractors.

On the other hand, of course, for older workers and those with dependents, the fact that a company provides health coverage may be more important than a wage increase. This can encourage retention of the workforce and, in particular, retention of older, more seasoned workers.

Nevertheless, as other costs of living rise, even veteran workers who want health care also need wage hikes.

“The U.S. government is the biggest purchaser of health care services,” says O’Sullivan who, in his role as chairman of the Union Labor Life Insurance Company, is intimately involved in the issues of health insurance and its costs. “The government should take the lead in controlling these cost increases and ensuring broad coverage for all Americans. That would alleviate pressure on LIUNA health and welfare funds, provide a more level playing field for our signatory employers as they compete with non-union outfits and allow our members a better opportunity to improve their standard of living through efficient, productive and safety-conscious work.”

As the U.S. elections approach, health care is a key issue among many potential voters. Those without health coverage – including the bulk of laborers who work for non-union companies – have an interest in securing it. Those with coverage, such as Laborers, have an interest in controlling its rising costs.

Both candidates are addressing the issue, though more from a values orientation than with detailed plans to solve the problem.

In a typical statement, Democratic candidate Senator John Kerry, in a comment to the New York Times (September 10), blamed the Bush administration, saying, “It’s wrong to allow skyrocketing health care costs to choke off new jobs, eat up family incomes and leave millions uninsured.”

In contrast, a spokesperson for the Bush-Cheney campaign was quoted as saying, “The president’s approach to this is a consumer-driven approach, and John Kerry’s philosophy is to shift the decision-making power to the federal government and shift the financial burden to the taxpayer.”

The 11.2 percent increase so far in 2004 is somewhat less than the 13.9 percent increase last year. This is the first decline in the rate of increase since 1996. However, experts generally expect costs to continue their rising trend.

The cost of average family coverage in a preferred provider network, the most common type of health care plan, is now $10,217. Nationwide, employees contribute 26.3 percent of this cost. Employers pick up the rest.

This hurts small companies, typical in construction, the most, and fewer are offering health benefits. Only 61 percent of companies of all sizes offer coverage, compared to 65 percent in 2001. About 132 million workers, up from 127 million in 2001, are without coverage.

[Steve Clark]