Outten & Golden: Empowering Employees in the Workplace

It's About Health Benefits, Stupid!

October 15th, 2003 | Paula Brantner

Every day it seems we hear about a new strike, and more often than not, the issue is not primarily wage increases any more. The central issue of many labor negotiations right now involves health benefits, and whether workers can rely on their employers to have most of their health care expenses covered by employer-provided health insurance plans, or whether cutbacks are going to enforce employees to assume a large share of rising health care costs. And whether workers are unionized or not, health care benefits are extremely important, and are likely to be the result of many more negotiations between employees or employers. In return, it’s likely that employers are going to play more of a role in overseeing the health of their employees, and will implement more wellness programs that promote weight loss, exercise, and disease management. Is a workable solution in sight?

Grocery workers are on strike in Southern California, with health benefits, not wages, as the primary focus of the strike. (See New York Times article.) So are transit mechanics and sheriff’s deputies in the same region, with health care also at issue. (See San Diego Union-Tribune article.) Last month, members of the United Auto Workers, in reaching agreements with the Big Three U.S. Automakers, accepted wage freezes and plant closings which in previous negotiations would have been unthinkable, but in return, were able to hold the line on their members’ health care costs. (See New York Times article.) Workers who do get higher wages in labor negotiations often get those wage increases in exchange for greater health care costs, as was recently the case at Hormel. (See Kansas City Star article.)

As one labor expert noted, this is a trend that is only likely to escalate in the months ahead. “The underlying issue is the whole issue of health care costs,” said Edward Lawler, a labor expert at the University of Southern California’s Marshall School of Business. “Unless there’s some change in legislation that completely redefines how health care gets delivered, I think we’re going to see this time and time again as a labor issue.” (See San Diego Union-Tribune article.) The same concerns were echoed by Greg Denier, director of communications for the UFCW, the union involved in the grocery workers strike. “This battle is growing nationwide. What’s happening is that contracts are up across the country in different areas. The employers are dedicated to eliminating affordable health care for employees, so the national health care crisis is being played out on the picket line.”

Rising health care costs have placed employers and employees in a financial bind: will employers absorb the costs, in the face of declining profits, or will they attempt to pass along some or most of the increase to their employees? All over, employees are being asked to pay higher co-payments coupled with reduction of coverage for prescription drugs and some medical services. And don’t think they haven’t noticed or don’t care, either. A poll of workers last year found that health-care coverage is the most important benefit, outscoring compensation by a margin of two to one. For two-thirds of those responding to the survey, health coverage was a primary factor in their employment decision. Since two-thirds of the American public rely on their employers for health care, this trend is bound to affect million of American workers. (See CNN/Money article.)

Setting aside a drastic shift in how health care costs are paid, such as a government-sponsored universal health care program, how can policymakers even begin to address this vast problem? At every step in the process of providing health care, from doctors to HMOs, from insurers, to employers, to workers, someone is going to have to absorb the costs which have dramatically escalated in recent years. Health premiums for businesses have risen at a double-digit clip for four straight years, and a similar rise is expected in 2004. The surge has caused workers to pay, on average, 50 percent more in out-of-pocket expenses since 2000, according to a survey released last month by the Kaiser Family Foundation. (See Philadelphia Inquirer article.)

Will it ultimately fall primarily on the backs of the American worker, or will all of the entities involved cooperate towards a solution which keeps the model of employer-provided health insurance a viable one? One of the methods that various employers are exploring involves paying employees to shift insurance costs to a spouse’s employer. This method shifts the burden of insuring a particular employee to a larger employer’s plan, which may not be so dramatically affected by one employee’s age and health status as that of a smaller employer’s plan. The smaller employer pays the lower premium to the employee, who in term remits it to his or her spouse’s employer for coverage. That method shifts the underwriting cost to the insurer, in essence, but of course, only works where an employee’s spouse has adequate coverage. (See Philadelphia Inquirer article.)

Some employers are focusing on “disease management,” which is an effort to control the costs incurred by workers with serious chronic diseases, such as diabetes, asthma, and heart disease, as those workers often consume the overwhelming majority of health care expenses. Disease management programs are intensive case management programs that use individualized care coordination for high-risk patients with multiple or complex medical conditions. However, some critics claim that these programs have yet to show the desired results. (See Nashville Business Journal article.) Other employers are building wellness programs into every aspect of corporate life, from the design of their campuses to the speed of the building elevators. Some large corporations have deliberately designed key buildings to be at a great distance from one another, to encourage more walking during the work day, and have chosen slower elevators, designed to get employees to take the stairs more frequently. (See New York Times article.)

While all of these efforts to promote employee health and reduce health care costs are laudable, it still appears that employees are increasingly being asked to bear the brunt of increased costs. And while unionized employees have some leverage in negotiating health care costs as part of the larger contract with the employer, non-unionized employees have little ability to influence their employer’s coverage decisions, especially as the economy limits workers’ mobility and renders empty the threat to move to another employer with better coverage. If costs continue to increase, and those costs continue to be shifted to workers, a significant crisis is surely on its way, if not already here, that could shake the model of employer-sponsored health coverage to its very core.

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