For Contractors, Health Care Is Ticket to Best Workers
As 2008 continues to unwind, contractors will face growing pressure to find and retain talented workers. According to statistical and anecdotal evidence, health-care coverage now is the ticket to those professionals.
Jim Jordan is director of construction services for Weaver and Tidwell LLP. With offices in Dallas, Fort Worth and Houston (weaverandtidwell.com
Although barely under way, 2008 already has produced two certainties: This is going to be a busy year for contractors, and there aren’t enough workers to handle the load.
None of this should come as a surprise. For several years the industry has been reporting it will need an additional 1.5 million construction workers by 2010 just to sustain productivity. The market is so tight, 10,000 Canadians received visas last year to perform construction work in this country. Meanwhile the average age of American construction workers has hit 47.
If you are a Texas contractor, it’s time to connect the dots. There is no place in the nation with as much construction activity as Texas, and as long as there is enough water the frenzy won’t slow any time soon: In this state, undeveloped land is bountiful, privately owned and always for sale; environmental laws hardly exist; labor is the cheapest in the nation; and so on. You’ve heard it before. The fly in the ointment for contractors, however, is that the oldest baby boomers are beginning to retire at the same time that the number of young people entering the construction trades is declining. Altogether it means contractors are facing a tough time finding and retaining full-time employees, especially the best ones.
As contractors wrestle with ways to attract top talent, one issue appears to overshadow all others, and that is health care. Forget vacations and signing bonuses, Americans in survey after survey now say company sponsored health care is the most important benefit next to salary. Health care has become the gold standard for many if not most of those seeking employment today.
Unfortunately for Texas contractors, providing health care is tricky. Most firms are relatively small, which means there aren’t a lot of employees to pay into any plan. Even at the largest companies health care is expensive and getting more so all the time. This year health-care costs are expected to rise 10 to 12%, according to Kaiser Permanente. In 2006, the average premium for private-employer coverage in Texas was $4,530 for an individual and $12,780 for families. These figures are slightly higher than the national averages, according to Associated General Contractors of America. Meanwhile 28 to 30% of the state’s population has no health insurance at all.
Given these realities, what can a contractor do to provide health care in a cost-effective manner? Since about half the state’s contractors don’t provide insurance to all employees, it’s a vexing question. However, today there is a multiplicity of ways insurance can be offered. Let’s take a look at a few of the most cost-sensitive:
In Texas, by consolidating hundreds of construction industry employers, AGC offers moderately priced insurance plans, including several “small group’’ plans designed for companies employing two to 50 workers. These plans offer preferred pricing on fully insured plans. Also, employers can choose to offer their employees individual coverage in lieu of group coverage. Deductibles range from $500 to $5,000.
One of the more interesting plans offered by AGC as well as many other providers is “carve-out coverage.” This type of plan allows company owners to buy insurance that covers salaried employees with comprehensive coverage, and hourly employees with basic limited benefit coverage. The only stipulation is the company must employ at least 50 workers.
Raleigh Roussell, president and chief executive officer of Quoin-AGC, says: “The plans offered by AGC clearly provide contractors, regardless of size, a solution to their health-care needs. These plans are cost effective and include exceptional benefits.’’
Before addressing other plans, a word of caution. For the sake of employees, all plans need to be closely scrutinized, but especially PPOs and Point of Service plans. Many but not all of these plans require patients to co-insure more than 25% of the cost of treatment. Or they continue to charge co-insurance for costs in excess of $10,000. Plans that do this have the potential to create a great deal of problems for the insured. Accordingly, employees need to understand their financial obligations under any plan offered them.
In fact, owners may want to separate themselves from the mainstream insurance market and instead self-insure their employees. Under the proper conditions, self insurance can be quite cost effective. The way it usually works is that the contractor designs the benefits provided by the plan and retains a third-party administrator to pay the claims. If the contractor doesn’t have a lot of claims, self insurance is a relatively inexpensive way to offer coverage. However, self insurance can be risky and cost much more than a standard indemnity plan if claims significantly increase compared to prior years.
Another innovative way to reduce the cost of health care is by means of Health Savings Accounts, which are gaining a fair amount of popularity. They essentially turn the matter of health insurance over to employees. These accounts work much like 401 (k) savings plans except the funds are used to finance medical coverage. Part of the “consumer-driven health-care’’ movement, health savings accounts must be offered as part of a health insurance plan having a deductible of $5,000 or more. Employers and employees make pre-tax contributions to the account, which can be used to pay for routine and preventative medical care. The insurance provides coverage for catastrophic or high-cost events. Any unused amounts in the savings account can be rolled over and used in subsequent plan years.
Health savings accounts, along with self insurance or a standard indemnity plan, are a good option for contracting firms that do not offer insurance or provide basic coverage to only full-time employees. These plans offer company owners a degree of flexibility that can help keep costs down.
Speaking of flexibility, there are numerous steps contractors can take to lower insurance costs. For example, bonuses can be offered to employees who successfully quit smoking or enter weight-loss programs. Or owners may reward employees who participate in wellness programs or who sign up for preventative-care programs that include regular physical exams.
The fact is, there are numerous ways contractors can create affordable health insurance for full-time workers and perhaps even for non full-time employees who provide services on a regular basis. The process should begin by talking to licensed, professional insurance brokers and leading trade associations.