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Home / Washington Business - March/April 2005 / Chair's Column: Runaway Health Care Costs Threaten All Washington Employers |
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Chair's Column: Runaway Health Care Costs Threaten All Washington Employers |
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Written On: March/April 2005 |
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Written By: By Tom Lemly - Chair, Board of Directors |
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Tom Lemly is a partner in the Davis Wright Tremaine law firm in Seattle, where he specializes in all aspects of labor law.
My law practice is devoted to working with business clients, large and small, with a particular focus on employment issues and employment litigation. This gives me an expansive view of the Washington economy, from food processing employers in eastern Washington to banks, high-tech companies and manufacturers in the Puget Sound region. I see a Washington economy gradually coming back to life, but still facing many headwinds that could push us back into recession.
Our clients see their costs rising on many fronts, but most report they have little power to pass on higher costs to customers. These higher costs run the gamut from the impact of Mother Nature (water shortages and higher hydroelectric bills) and soaring oil and gas costs to government-imposed cost increases (B&O taxes, threatened rollback of the 2003 unemployment insurance reforms, and ever-increasing regulation).
One cost, though, threatens to push most other concerns into the background — health care. As in many areas of concern to employers, this shows the interplay between broad social and economic forces and the role of state government that adds to the burden on employers, threatening their survival. Controlling health care costs has been a national concern for a decade or more. We spend almost 15 percent of our gross domestic product on health care and this percentage has inexorably risen from less than 5 percent. For employers, it is a huge and growing cost of staying in business. Starbucks now spends more on health care for its employees than it does on coffee for its customers.
In the past, employers focused on controlling wage costs and paid for health insurance with little thought. Today, the soaring cost of health care is the primary issue that divides management and labor in collective bargaining. Increasingly, our clients are telling their union counterparts that there is no money for wage increases if medical coverage is to be maintained.
Disagreements over controlling or sharing health care costs have been the number-one cause of strikes and other labor disputes. Local examples include Boeing, WestFarm Foods (Darigold) and Group Health, and a near miss in the local retail grocery business, which barely avoided the lengthy strike over health care suffered in California.
State government makes an already bad situation worse in at least three ways. First, some legislators and their union allies are strenuously pushing a “pay-or-play” package that would impose additional taxes on employers who have concluded they cannot afford to offer medical insurance to their employees. Second, the Legislature and the insurance commissioner have regularly added more categories of mandated coverage for all Washington medical insurance plans; the latest is the requirement to treat psychological conditions the same as any other medical condition. Every added benefit, of course, means additional costs.
Finally, in dealing with its vast work force in the first round of collective bargaining, the executive branch imposed virtually no restraint on state employees’ generous medical insurance plan, and still granted both across-the-board and seniority-based pay increases. As a result, state employee health care costs alone will add $813.2 millions to the state budget over the next biennium (a gain of 29.5 percent over the last biennium), crowding out other deserving programs and almost certainly precipitating tax increases to cover these huge costs.
The time for business as usual in health care has passed. Government, employers, unions, employees, health care providers and insurance companies are going to have to come together to overhaul the health care delivery system, or this 800-pound gorilla is going to devour us all. AWB is committed to a leadership role in this effort, and we need your help.
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