What do GM, Ford, hotels in LA, grocery stores and public transit in Sacramento, public transit in Philly, and Boeing have in common?
All were faced with strikes and/or labor strife due primarily to conflicts about health care insurance, costs, and access. The strike by Sikorsky workers in Connecticut (registration required) is yet another example of health care’s growing pressure on US employers.
There’s a great quote in the NYTimes article on Sikorsky from one of Sikorsky’s flight technicians that crystallizes this issue – ” “This isn’t only about us,” said Bruce Peters, a flight technician … This is a nationwide problem with medical care.” Peters notes that any wage increases the workers have been offered will be consumed by insurance costs – the additional copays, co-insurance, and employee premium contributions contained in the company’s latest contract offer.
Peters personalizes the national disparity between wage growth and employees’ personal health care costs. Premiums for employer-sponsored health care have grown five times faster than wages since 2000.
In 2004, the average family’s insurance premiums came within an x-ray charge of $10,000. In contrast, median family income in 2004 was slightly over $43,000. Yes, you read that right – health insurance costs came to 23% of family earnings.
And yes, things have gotten worse since the sunny days of 2004; predictions are that 2006 will see the average family’s insurance costs hitting $14,500 per year.
A survey of smaller employers in California indicates that more than half will not be offering health insurance to their workers this year. This despite their optimism about growth and increased revenues in 2006.
The sky is falling, and it is crashing down around the heads of US employers, employees, taxpayers, and governments.
What to do?
Of all the groups out there, the National Coalition for Health Care Reform is making the most sense. NCHC’s goals are universal coverage; health care quality improvement; cost management; equitable financing and simplified administration.
What is notable about their work is nowhere does the coalition advocate single-payer, private insurance, or any other system. Yes, they research, study, and report on the potential impacts, positive and negative, of the several types and sources of funding. No, NCHC doesn’t take a political stance.

The “Wal-Mart” legislation on the docket in over 20 states is pushing some pro-business advocates into a Hobbesian choice – support Wal-Mart and other opponents of mandatory benefits legislation, thereby adding thousands to Medicaid rolls, or support the legislation and place a heavier financial burden on the world’s largest retailer.
Wal-Mart and several other large employers have thousands of employees covered under state Medicaid programs. The modestly paid employees qualify for the taxpayer-funded coverage due to their relatively low income. And, Wal-Mart’s health insurance plans are too expensive for these employees; different souces indicate different participation levels for employees, but none report participation above 46%. (The Wall Street Journal claims 46% of employees are enrolled in the company’s plans, other sources indicate 43% of the company’s 1.3 million workers are covered under their plans in 2005, a drop of five points from last year’s 47%.)
The average income for a Wal-Mart employee is less than $20,000 per year, making it difficult for them to afford even the least-expensive plans offered by the company. The company has developed a low-cost alternative plan (the “Value Plan”) that provides minimal coverage for an employee contributing $11 per month; while there are tight limits on benefits in the first year, these restrictions make sense; they will help mitigate adverse selection risks.
Improvements to the health benefits annonced by CEO Lee Scott include a reduction in the eligibility waiting period from two years to six months for full time workers; allowing children of part-time workers access to the plans; and reducing the waiting period for part time workers.
There are more than enough Wal-Mart bashers and advocates throwing stones over these and other issues. And the company is (somewhat unfairly) being made into a whipping-boy for a national problem. Remember, the number of employers offering health insurance has dropped by 15% over the past five years…
Simply put, labor expenses are a very significant part of Wal-Mart’s overall cost structure, and health benefit costs are hitting the company both directly (via employees on insurance) and indirectly (via the tax burden from uncompensated care, Medicare and Medicaid). This increases the company’s cost of doing business, and thereby their prices to consumers.
This is not a value statement, but reality.
What does this mean for you?
The US health care system is a burdeon on employers and our industrial competitiveness.