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Fewer employers paying the entire tab for health care

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Fewer employers paying the entire tab for health care

Harley-Davidson Motor Co. is among a dying breed of companies in the United States.

The motorcycle manufacturer paid 100% of the health insurance premium for union workers at its York, Pa., assembly plant until their contract expired. But rather than slash contribution to premiums in the next contract period, the company proposed a three-year agreement that maintained full company-paid health coverage.

The initial offer, which called on workers to shoulder higher out-of-pocket health care costs plus reduce the wages and pension benefits for new workers, led members of the International Assn. of Machinists and Aerospace Workers to overwhelmingly reject the proposal and walk off the job Feb. 2.

The nearly three-week dispute ended Feb. 22 when IAM members at the York plant, on an 83% affirmative vote, ratified a three-year pact that preserves 100% company-paid health care premiums.

"There is a time for sharing sacrifices and a time for sharing success," IAM International President Tom Buffenbarger said in a statement. "And after 13 straight quarters of record profits and sales at Harley, these workers know what time it is."

"The agreement is an important step in managing costs that could be detrimental to the business over the long term if the company doesn't start to control them now," said Fred Gates, general manager of Harley's York plant, in a statement.

While the contract provides 4% wage increases each year, it does include a lower wage for new employees that will be equalized by the end of the contract, Mr. Gates said. Harley also will match less of optional contributions to its pension plan for new hires but will increase its level of match for 401(k) contributions, Mr. Gates said.

Benefits consultants say the face-off between the Fortune 500 company's heavyweight motorcycle unit and its unionized workers is not uncommon, although Harley's agreement to continue free coverage is rare.

Few large companies offering free health care coverage want to continue that commitment, said Bill Sharon, a senior vp in the Tampa, Fla., office of Aon Consulting. Of those that maintain 100% coverage, "they're probably stuck in some legacy environment either because of union contracts or other promises made, but probably over time (they) would want to move out of that and get more in line with the rest of the industry."

The number of large employers that offer 100% employer-paid coverage has declined over the past several years (see chart).

Nationally, employers pay about 80% of the health care premium, with employees paying the balance, said Helen Darling, president of the Washington-based National Business Group on Health, whose members are mostly large companies.

Employer contribution percentages vary by industry and region, she added. Employers in the South and Southwest, where there tends to be less union activity, pay a lower percentage of premiums, on average, Ms. Darling said.

Among smaller employers, however, the story is very different.

Using data from a survey of U.S. employers in the Medical Expenditure Panel Survey-Insurance Component, economists Alice Zawacki of the U.S. Census Bureau in Washington and Amy K. Taylor of the Agency for Healthcare Research & Quality in Rockville, Md., found that "establishments," or locations where business activities take place, were more likely to pay 100% of the premium if they were young, small and had higher-paid workforces.

"It is more likely that a large establishment will offer insurance than a small establishment," Ms. Taylor said, "but among all establishments that offer insurance, the small ones are more likely to pay 100% than large ones."

Why small firms are more apt to cover the full cost of premiums is a matter of speculation.

"The employers may be trying to encourage more workers to enroll in the plan in order to lower the premium," Ms. Zawacki said. In some states, employers' premium contribution may be designed to ensure that employers meet minimum participation requirements, she said.

Once an employer offers full coverage, however, reducing its contribution to the premium can be a delicate exercise, particularly if benefits are negotiated in collective bargaining, experts agree.

That was the situation in California in 2003, when workers at several large supermarket chains, which had previously covered 100% of the health insurance premium for union workers, went on strike.

"One of the big issues in the contract negotiations leading to the strike and lockout was the grocers were looking to initially reduce their contribution toward health care and wanted to get away from maintenance of benefits," said Ken Jacobs, chair of the University of California, Berkeley Center for Labor Research and Education.

The resulting contract, which required workers to contribute 20% of the premium and imposed longer waiting periods for coverage of new workers, "really did drastically reduce health benefits for new workers in Southern California," Mr. Jacobs said.

As of last September, for example, 44,000 workers had been hired at the supermarkets since the new contract took effect in 2004 between Albertson's Inc., Ralph's Grocery Co. and Vons and members of the United Food and Commercial Workers union; of those, only 29% had worked long enough to qualify for coverage, Mr. Jacobs said. That low rate of eligibility is a result of high turnover in the workforce, new 12- to 18-month waiting periods for individual health coverage and a 30-month waiting period for family coverage. As a result, only 7% of new workers have health care coverage under the plan, he said.

Waiting periods as well as the amount the employer contributes have been among the top issues for workers and the supermarkets as negotiations continued last month on a new contract, Mr. Jacobs said.

"I think no one wants to go back through a strike as they did three years ago," he said.