Human Resources: Employers Put Top Priority on Winning Health Care/Insurance Concessions

Employers negotiating union contracts in 2005 will seek major concessions on a range of heath care and insurance benefits, according to BNA’s 20th annual Employer Bargaining Objectives survey and report.

At the same time, an improved business climate and increasing profits may expand bargaining options, allowing more organizations to consider upping wage adjustments in new contracts.

“Financial improvements mean less pressure on management negotiators to limit pay raises this year,” said Joshua Joseph, research director at BNA, Inc. "As a result, we may see employers offering higher wages or lump-sum payments as tradeoffs for desired cuts in health care.”

Nearly six out of 10 surveyed employers (59 percent) say they would consider making wage concessions in 2005 contract talks. This compares with about one in five employers saying they may concede on provisions related to job security (19 percent), paid leave (22 percent), health care/insurance (21 percent), and pensions/retirement (22 percent). The proportion of employers expecting first year wage adjustments to average 3 percent or more for new contracts is also up in 2005 (40 percent), compared with last year’s figure (28 percent).

On the other side of the coin, fully 69 percent of surveyed employers list health care and related insurance benefits as a top priority for gaining concessions from labor. Running a distant second and third are employer priorities to gain concessions on wages (28 percent) and pension/retirement benefits (22 percent).

Employers will look to trim a variety of health benefits in their 2005 contracts. Health provisions most commonly targeted for cuts or elimination include prescription drug coverage (32 percent), doctor visits (28 percent), hospital coverage (26 percent), and surgical coverage (26 percent).

Efforts to shift health care costs to employees will also be widespread. More than half of organizations (52 percent) that already require employee premium contributions for health coverage will seek to increase the payments, while about one-third of employers (36 percent) that don’t require such contributions will bargain to add them. Similar findings emerge for employer bargaining plans related to health care copayments and deductibles.

Other findings from the survey include the following:

* Some employers are especially likely to seek cuts in health care. Among employers negotiating with large bargaining units-those covering 1,000 or more workers-75 percent will seek health care/insurance concessions, compared with 52 percent of employers negotiating with smaller units. Plans to seek health care concessions are also more common among manufacturers (89 percent) than nonmanufacturing employers (61 percent).

* Employers generally report improved financial outlook. More than half of the surveyed employers (51 percent) expected to turn a profit in 2004, compared with 26 percent expecting to lose money. In contrast, results from the prior year showed employers about evenly split between those expecting to make and lose money.

* Lump-sum payments are more common among select employers. Lump-sum proposals are more prevalent among employers planning to bargain for cost-saving wage and benefit provisions. The finding most likely signals employers’ recognition that workers will want to see something in the overall contract that offsets proposed cost-saving measures.

* Few employers have clear plans for new Medicare Part D prescription drug benefit. Among employers that provide prescription drug benefits to retirees 65 or older, 65 percent said they were not yet certain what options(s) to pursue under the new Medicare Part D benefit, while 25 percent expected to keep all or some current benefits and take the subsidy available under Part D. Medicare will begin paying for prescription drugs through private plans when Part D of the Medicare Modernization Act takes effect in 2006.

* Some employers will seek to trim paid leave and job security provisions. One in five employers (21 percent) will bargain to eliminate or reduce existing paid leave provisions, and three in 10 employers (29 percent) have similar plans for at least some job security provisions. Employers will be especially prone to target provisions that limit the use of temporary/contract workers (37 percent) and overtime work (31 percent).

* Employers will seek greater leeway to outsource or subcontract work. Nearly one-fourth of employers that have subcontracting restrictions in their current agreements hope to scale back or eliminate these provisions in 2005. Among employers whose agreements lack subcontracting restrictions, none indicated a willingness to consider adding them.

* Economic austerity is still evident among a minority of employers. Twelve percent of employers will seek to freezes or reduce wages in the first year of their 2005 contracts. In many cases, such plans are coupled with desired cuts in health related benefits.

* In the event of a breakdown in labor talks and a union strike action, about half of employers would consider replacing striking workers. Nearly one-third of the labor relations professionals surveyed (32 percent) say their organizations would be ‘‘very likely’’ to hire striker replacements in the event of a work stoppage in 2005, up from 27 percent last year and 21 percent in the previous two years. An additional 18 percent report that hiring striker replacements would be a ‘‘somewhat likely’’ response to a work stoppage in 2005.

Further details and breakdowns are contained in the full report. Press inquiries-contact Karen James Cody. All other inquiries please visit http://www.bna.com/promotions/emplbarg or call BNA PLUS at 800-452-7773 (202-452-4323 in Washington, D.C.) for more details and ordering information.

The Survey Sample: Labor relations professionals from 100 U.S. employers responded to the survey between Sept. 27 and Nov. 12, 2004. Represented in the sample are manufacturers (28 percent), services/nonmanufacturing companies (35 percent), and nonbusiness entities (37 percent), such as health care facilities, educational institutions, and government agencies. Sixty-six percent of the surveyed employers are negotiating with bargaining units covering 1,000 or more workers, while 34 percent are negotiating with units of fewer than 1,000 employees.

BNA, Inc. is the leading publisher of print and electronic news and analysis for professionals in business and government. Through survey research, expert analysis, and in-depth reporting, BNA continues to advance the understanding and practice of human resources within organizations. Visit BNA at www.bna.com