Healthcare Costs: Hold the Line

Healthcare is a two-edged sword for engineering firms these days. As our cover story (p. 34) attests, the sector, without question, is a red-hot, seemingly recession-proof economic engine for those in the AEC community. At the same time, according to design industry analyst ZweigWhite Assocs., providing healthcare coverage for their employees is one of the biggest challenges facing many AEC firms.

According to a recent procedures and benefits survey conducted by the Natick, Mass.-based company, more design firms are requiring their employees to contribute to insurance premiums than ever before—55% to be exact, nearly double the percentage five years ago.

The amounts that employees are paying for both employee-only and family coverage have also dramatically increased. According to ZweigWhite's survey, the median contribution to employee insurance hit a seven-year high this year at $58 per month. The cost for family coverage also hit a seven-year high at $255 per month.

This news is not so surprising, given the dire announcement of the National Assn. of Manufacturers at the recent National Manufacturing Week in Chicago. The organization proclaimed the manufacturing sector was heading for a crisis, unless a number of issues, healthcare reform among them, were addressed by the government (visit www.csemag.com for the story).

According to NAM's membership survey, health benefit plans increased between 29% and 36% over the last two years for the majority of respondents, while nearly 28% reported their costs increased by more than 30%. The majority of the group's membership expect costs to increase another 11% to 20% this year.

What can be done? Per NAM, permanent, cost-cutting measures must be implemented by Congress. How, exactly, is anyone's guess. What are the interim choices? Ian Rusk of ZweigWhite warns that firms considering the step of asking their employees to help more should do so cautiously. Further, he suggests they should offer "cafeteria" plans to allow employees to contribute to insurance premiums with pre-tax dollars to reduce out-of-pocket expenses. What are you doing? What other business-related burdens are hamstringing your firms right now?

The war in Iraq certainly casts a further shadow over business opportunities. The Portland Cement Assn. recently released its predictions on how the war will affect the economy as a whole and the construction sector in particular (see "In the News" p. 13). The group was optimistic for recovery if the war experienced a quick ending. To date, that hasn't been the case, as the urban guerrilla nature of the fighting appears to imply a protracted stay. PCA fears that it could mean another consumer-led recession. But ZweigWhite analysts argue design firms, even in these unstable times, need to hold the line, specifically recommending that business plans be kept intact; that marketing messages not be changed midstream; and most of all, that firms keep marketing. Food for thought.