Rising Health Costs Cut Into Wages

For many workers, health care and other benefits determine whether they stay on a job. "Raises and health-care benefits are both important," said Carlton L. Scott, a locksmith who has worked at Georgetown for 26 years. "They go hand-in-hand."

While about three out of four full-time workers who earn $15 an hour or less have access to health-care coverage on the job, just over half buy it, according to a report by the Bureau of Labor Statistics. Many analysts say that the cost -- lower-wage workers pay about a third of the plan premiums with employers picking up the rest -- discourages many from having coverage. By comparison, nine out of 10 full-time workers making more than $15 an hour have health coverage available, and overall almost three in four are covered by their jobs.

Employers report that the unpredictable and often uncontrollable cost of health-care coverage is among their major concerns. Nearly nine out of 10 firms that responded to a National Association of Manufacturers survey last year named the cost of health insurance as one of their top-three worries -- ranking it higher than government regulation, competition from imports or finding qualified employees.

An increasing number of companies are trying to control costs by promoting employee wellness campaigns and pushing insurance companies and health providers for more details about their operations.

"Certainly, it is frustrating for the benefit managers and the budgeters," said Jeri Gillespie, vice president for human resources policy at NAM. "They say, 'my pot is only so big every year and our health-care costs are rising.' "

For many employers, the choice is coming down to one between better benefits or better wages for workers. At TeraTech, a software development firm in Rockville, president Michael Smith decided early on not to pay for the health insurance his company offers its 14 employees. Instead, he included more money in his employees' salaries and offered them the option of buying health insurance, an approach that he says promotes employee awareness of the plan's costs -- both for workers and the company.

"I knew health care was a money sink," Smith said. "If people don't see the full price, they don't realize how much it costs."

After several steep premium increases from his previous health plan, Smith switched to a health savings account, which allows employees to set aside as much as $7,000 a year in pretax dollars to pay for medical care. The plan is supplemented by a high-deductible health insurance plan to cover catastrophic events, which costs employees between $75 and $100 every two weeks.

Even at that, just four of Smith's employees participate in the company's medical plan. "Nooooo," responded TeraTech office administrator Alison Beman, the mother of a teenage daughter, when asked whether she took part in the plan. The plan would require Beman, who is separated from her husband, to come up with the full cost of her prescriptions, which she said makes it prohibitive. Beman is covered by her husband's health plan, which, she said, is one reason she has not gotten a divorce.

"I love working here," Beman said. "But if I didn't have that coverage, I couldn't afford routine appointments, and I would not be able to keep this job."