(The following article by Julie Appleby was published in the January 9 issue of USA Today.)
WASHINGTON, D.C. — Rapidly rising health care costs are causing strife at bargaining tables nationwide as employers seek to shift some of the burden to workers while unions battle to save benefits.
The first major skirmish this year is expected Tuesday when up to 17,500 General Electric unionized workers plan to go on a two-day strike to protest new health insurance deductibles that are expected to cost GE’s full workforce at least $28 million.
As spring and summer approach, the auto industry, telecommunications firms, state workers and janitors are also expected to face tough negotiations over new contracts. While health care coverage has always been an issue at the bargaining table, it has risen to the No. 1 spot because of rapidly rising medical inflation.
“Until we take some of the profit out of health care and start serving the needs of people, this crisis will not get better,” says Stephen Tormey, spokesman for the United Electrical, Radio and Machine Workers of America, one of two unions that has called the strike at GE.
This year’s labor negotiations come as health insurance costs are rising at their fastest clip in a decade. Managed care is no longer slowing medical inflation, so employers are searching for new solutions, but there are few proposals that provide a short-term, quick fix.
“Our benefits are among the best in the industries we are in,” says GE spokesman Gary Sheffer. “We are simply asking employees to share a modest portion of the double-digit increases we’ve seen in health care.”
But unions see the shift of costs to workers as an attack on what has long been a perk of union membership: access to high-quality, low-cost health insurance.
“For unions, this threatens to unravel decades of progress at the bargaining table,” says Harley Shaiken, a professor who specializes in health care and labor issues at the University of California-Berkeley.
For GE, the labor action comes shortly after the firm endured the public unveiling of its largesse to former CEO Jack Welch. His divorce proceedings revealed in fall that his retirement perks had included use of the GE jet and a luxury apartment, perks that he later said he would pay for.
“There is a notion that it appears to be in bad taste to make $16 billion and say workers ought to pay more for health care,” Shaiken says. “That doesn’t play well in an era of corporate scandals and golden parachutes.”
Premiums are soaring
Health care costs are going up: an estimated 15% rise in premiums on average for 2003. Overall spending on health care services hit $1.4 trillion nationally in 2001, rising at the fastest rate since 1991, according to federal statistics released Tuesday. Health care spending now accounts for 14.1% of the nation’s gross domestic product. And employers are wrestling with what to do.
While out-of-pocket costs for workers are still lower than they were a decade ago – before managed care slowed their increase – most insured workers are being required to spend more on their coverage this year.
A recent Towers Perrin survey of 358 employers found that workers will pay 19.3% of health insurance premiums this year, up from 18.7% in 2002. That same survey found that 75% of firms had increased deductibles, co-payments or monthly contributions paid by workers in the past two years.
“Annual increases in health care costs are growing at historically high levels that show no sign of abating,” the Perrin report says.
Unions may face a public relations battle, as they fight to keep costs down for their members even as millions of workers not represented by unions have to pay additional amounts for health care. The cost increases passed along in the non-union sector may also make things more difficult for unions to consider job actions to protest benefit cuts.
“There’s been so much coverage about the benefit cutbacks and workers paying more throughout the economy, which might temper the propensity to strike,” says economist Paul Ginsburg of the Center for Studying Health System Change in Washington, D.C.
Others, however, say they expect more strikes.
“Strikes over health costs are few and far between, but I think that 2003 will see much more picket line action on this,” says Arthur Shostak, professor of industrial sociology at Drexel University in Philadelphia.
Labor unrest – coupled with the growing frustration of employers and other consumers about health care costs – could fuel an already simmering debate in Washington over what to do.
“What’s really called for is joint labor-management collaboration to help progressives in Congress produce a long overdue overhaul of the health system,” Shostak says.
Labor action over health benefits began to pick up last year. In the summer, workers at Hershey struck for more than a month to stop a plan that would have significantly increased their health care costs. When it was over, the union members accepted lower pay increases instead of the health care increase.
That’s always the trade-off – and something workers often don’t consider.
“Health care costs get built into wages,” says Henry Aaron, a senior fellow at the Brookings Institution. “Employers determine how much to pay to hire workers and they don’t care how they pay it – cash wages or fringe benefits.”
Sometimes wage increases don’t even cover health cost increases. At the Associated Press, reporters and photographers are withholding bylines today to protest a 40% increase in health care costs workers say will eat up 1.9% pay increases proposed by management.
For some, the fight over health care is not simply to keep employee costs down but to get coverage in the first place. In October, janitors in Boston won public support during a month-long strike and succeeded in winning health insurance benefits for about 1,000 part-time contract janitors, mainly by putting pressure on building owners to ante up the cost.
This year, the Service Employees International Union says it will take similar action for janitors in Washington and Sacramento. The union also plans to press employers in other cities to cover more of the premium for already-insured janitors.
“For low-wage workers, having to pay part of the premium causes them to opt out,” says Stephen Lerner, who runs the “Justice for Janitors” campaign for the Service Employees union. “If you’re making $9 or $10 an hour and someone says you have to pay $100 a month for insurance, they end up not having insurance,” Lerner says.
He says the workers are prepared to strike if they have to.
But strikes are risky, particularly in a bad economy. Last year, the union representing Boeing workers called for a strike over health insurance cost increases set to go into effect in 2004. But the union failed to get the required two-thirds vote from the rank and file.
“No one liked the proposal (from Boeing),” says Connie Kelliher, a spokeswoman for District Lodge 751 of the International Association of Machinists, which represents 25,000 Boeing workers.
“But the economy is so bad here – and 30,000 workers at Boeing have been laid off – that people were afraid to strike.”
That wasn’t the case in 1995, when Boeing workers went on strike for 69 days, mainly to preserve health care benefits.
“When workers are insecure about their employment status … those are times that cause workers to think twice,” says Kent Wong, director of UCLA’s Center for Labor Research and Education.
Sending a message
Workers represented by two GE unions say they have no choice but to strike over the new health insurance co-payments the company instituted on Jan. 1. The two-day strike is set for Tuesday and Wednesday.
“We’re convinced a strike is an absolutely necessary response: Otherwise, it will encourage forces that are even greedier to go farther down this path,” says union spokesman Tormey.
The strike will affect 48 locations in 23 states, including workers in GE’s appliance, lighting, power systems and aircraft engine businesses, among others, union officials said. Manufacturing plants that would be affected include those in Lynn, Mass.; Erie, Pa.; Louisville; Schenectady, N.Y.; Arkansas City, Kan.; and Fort Edward, N.Y.
The union says it fears the new co-payments are just a start. Negotiations on a new contract begin this summer. Labor leaders say they expect GE to seek further concessions on health care costs.
Under the plan that went into effect New Year’s Day, GE workers’ paycheck contributions for health care remain the same – $8.71 a week for family coverage and $2.96 for single. But co-payments for visits to specialists will go from $15 to $25, emergency room care goes from $30 to $50, and hospital care will cost $150 to $300 a year. Drug co-payments will also rise.
GE says the new payments will cost the average worker $200 a year. The unions say the amount is closer to $400. The company says it is passing along only a portion of the increase it faces in health costs. All 200,000 GE employees face changes in health benefits, not just the union workers.
GE spokesman Sheffer says the company’s health care spending hit $1.4 billion last year – up 45% from $965 million in 1999, with drug costs and hospital charges making up the largest portion of the increases. As a percentage of earnings, the amount GE spent on health care remained about the same during those two periods, around 9%.
The union says workers are being asked to pay $28 million to $30 million more a year, even as the company’s earnings rise. GE says it will post net earnings of at least $15.1 billion for 2002, up from $13.7 billion in 2001.
“Thirty million dollars is not terribly significant in the overall health of GE, but it is of great significance to those most vulnerable to medical costs,” Tormey says.
By year’s end, experts say some unions will win their skirmishes over health care and some will not. But overall, “Labor will lose the whole war, because there will be a lot of cost-shifting to workers,” says Kenneth Kovach, a professor of industrial relations at George Mason University in Fairfax, Va.
He expects that trend to continue as workers increasingly bear escalating health care costs. “We’ll look back 10 years from now and say these were the good old days,” Kovach says.