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Could Health Care Costs Derail a 2011 Construction Comeback?

December 1, 2010
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I’ve been feeling pretty good about 2011. There are several signs the economy is rebounding. Many construction-related firms throughout the supply chain have indicated they are gradually climbing out of their respective holes.

Advertising – a decent gauge of how confident business leaders are – has been increasing. And RFPs for the coming year are up compared with this time last year. While business leaders had gloomy view of what 2010 would bring, they feel much better about 2011.

However, in the last few weeks I encountered two incidents of health care cost increases that made me grimace. My employer notified us our plans will change to help absorb 2011 increases for our coverage. Also, I serve on the board of a small non-profit that faces a 50 percent premium hike for each insured family.

As I thought about these increases, I recalled the palatable concern expressed by several contractors during a roundtable discussion back in September. They had received word from their health care providers and accounting advisors to prepare for big increases.

As small- and medium-size business owners, they were dreading the hikes. Some said might be forced to drop or reduce coverage for some employees. The Patient Protection and Affordable Care Act, signed into law on March 23, 2010, had become a worrisome reality.

These contractors were successfully navigating the recession by carefully watching every possible expense while pursuing new revenue streams to replace lost business. But the pending health care increases are out of their sphere of control – hence their comments expressing frustration and dread.

Health care costs have been increasing for decades, so the rise in costs cannot be placed entirely on “ObamaCare,” as some call it.

So why are these contractors so worried?

I can think of two reasons. For one, employers are uncomfortable with health care mandates that limit options on what they can provide to employees. Second, there is concern that government intervention will undermine the free market system that creates competition and price sensitivity.

The pending health care law is complex, with various components phasing in through 2018. USA Today provided a year-by-year overview that made my head hurt. And yet, if I owned a business, I’d pour over every word and attempt to make assumptions on how these changes might impact my bottom line.

Adding to people’s frustration is the growing number of waivers granted to various groups. McDonald’s was among the most prominent of 30 companies that got a lot of early attention.

More recently, the New York Times documented waivers for 111 companies and 1.2 million people.

More than anything, I sense the biggest challenge with health care reform is that it adds to the uncertainty construction business owners already feel. If you have successfully shepherded your company through the last two years, you really don’t want to battle a new foe, especially one that has the backing of the federal government.

The waivers, unclear interpretations of the act, and lawsuits filed by several states’ attorneys general promise that health care reform will remain a top issue in 2011.

Stay tuned.
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