After complimenting the LIUNA and LHSFNA leadership for their grasp of key health care issues, Stanford University economist Victor R. Fuchs warned that “trends in the health care industry are pushing employers to adopt consumer driven health care (CDHC) plans. Though your health care coverage is structured differently than most industries, the forces driving this change have significant implications for your funds as well.”
Fuchs, author of Who Shall Live? Health, Economics and Social Choice, past president of the American Economic Association and one of the nation’s acknowledged experts in health economics, outlined the main features of the health care crisis in his remarks on the second day of the 2003 Tri-Fund Conference.
After a steep rise in the 1980s and a brief leveling in the mid-1990s, health care costs are again rising sharply, according to data cited by Fuchs (see graph). “Health care costs are now rising faster than the rest of the economy, and this will be the case for the foreseeable future. The driving force behind this increase,” says Fuchs, “is new technology, including new drugs. Everyone wants the best treatment possible, and the new advances are expensive.”
“The cost of providing the outstanding benefits in LIUNA health and welfare plans is soaring again this year,” says new LHSFNA Health Promotion Division Director Mary Jane MacArthur, a benefits specialist with more than 30 years experience in the health care industry. She has worked with LIUNA funds since 1980. After double-digit increases in 2001 and 2002, costs are expected to rise by 13 to 16 percent in 2003.
“For administrators and trustees of LIUNA health and welfare funds,” says LIUNA General President Terence M. O’Sullivan, “this means, generally, that the costs of providing coverage will likely rise more rapidly than our signatory employers’ capacity to contribute. Unless we improve our members’ utilization of services. Inevitably, pressures will mount to limit or reduce benefits. for Laborers or to increase hourly contributions for health and welfare.
Outside of the construction industry, according to Fuchs and other experts, some large employers – those with single-site facilities or extensive human resource departments able to consult closely with all employees – are beginning to adopt CDHC plans to replace or supplement traditional plans as a way to control rising costs and utilization. In these plans, employers provide employees with a set amount of money to purchase health care coverage. The employee can chose between several plans with varying levels of benefits and employee contributions (usually in the form of deductibles and co-pays). It is thought that employees who pay directly for their health care will pay more attention to their health care decision-making. The key elements of a sound CDHC plan are benefit design, employee education to change behavior and the issuance of timely information to help employees understand cost and treatment options.
In construction, many employers are small and workers may move among employers during the course of a year. Union employers do not directly provide health insurance. Instead, they make contributions based on hours worked to a jointly-managed LIUNA health and welfare fund that provides the health care coverage. Providing a CDHC option would be administratively burdensome for most LIUNA funds since many Laborers do not work or live in close proximity to fund offices. Because workers move frequently among employers, health information, guidance and consultation cannot be readily dispensed to all employees through a central location, a critical necessity for CDHC plans.
Nevertheless, according to MacArthur, even under LIUNA’s traditional health care plans, a more educated health care consumer is the key to controlling costs and retaining accessible, quality services. “Over the years, for a variety of reasons, Americans have come to think of health care as something paid for by the company or the government. As a result, we don’t think enough about our health care decisions. More consideration is encouraged. We want members to use the health care services they need to stay healthy and improve their health, but avoid accessing the system unnecessarily, just because they have coverage that might pay for services. Over-utilization contributes to higher costs and results in the need to either increase the contribution rates for coverage or reduce benefits.”
“It is critical that LIUNA members realize, one way or another, that we pay for our health coverage,” says LIUNA General Secretary Treasurer and LHSFNA Labor Co-Chairman Armand E. Sabitoni. “When negotiators have to choose between wage increases or increased contributions to maintain an established level of health benefits, Laborers are pinched whether we realize it or not.”
Cutting Costs to Preserve Benefits
“The pressures of the larger health care marketplace affect LIUNA funds as surely as they affect others,” says MacArthur. “As health care costs rise, funds must constantly review their benefits and utilization to ensure that they will be able to continue to provide comprehensive benefits at an affordable cost.”
Unfortunately, many funds already have had to cut benefits. Two options exist to avoid or limit further cuts.
Benefit Design Assistance
The LHSFNA Research Division recently surveyed all LIUNA health and welfare funds to better identify the scope of their benefit programs. The response rate was excellent – 98 percent.
With this information and each fund’s Summary Plan Description (SPD), it is now possible to prepare analyses for funds that compare benefit programs within a given region or nationwide. By seeing how their benefits stand vis-à-vis their peers, funds can evaluate proposals to expand or restrict coverage or provide justification for current levels of coverage.
For assistance, contact the Health Promotion Division.
One option is limiting administrative expense, but this can be controlled only up to a point so, for smaller funds, mergers might be an option to considered. Through mergers more members are covered under a single plan which reduces overall administrative expense. The LHSFNA can assist funds that wish to assess merger possibilities. Short of merger, funds may pursue a related option: joint-purchase or joint-utilization agreements wherein two or more funds share in the acquisition of particular administrative services.
The other option is to control utilization of healthcare services and encourage healthier lifestyles. To assist in this effort, the LHSFNA promotes a variety of wellness programs designed to curtail illness and control wasteful over-utilization of services. Strategically, these programs support the preservation of LIUNA’s health funds and the retention of comprehensive benefits at affordable costs.