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Has health care gotten to be like Mark Twain's take on the weather"one of those things everyone talks about but can't do anything about? Until recently, you could be forgiven for thinking so. Virtually all employers have been faced with the byproduct of shocking cost increases in health care "that is, the accompanying jump in the cost of health-care coverage for their employees. Hoteliers who haven't been able to provide coverage for their workers feel cut off. Those who would like to extend coverage to spouses and dependents face similar concerns. And even for the large chain-scale companies, hard decisions and adjustments are facts of life in 2007.
In Washington, health-care reform is paramount "it's generally estimated that 47 million Americans have no health insurance. President Bush this winter proposed in his State of the Union address a plan to revise the tax code, allowing for a standard deduction for health insurance to reduce some of the personal sting of paying for coverage. That follows on the heels of legislation proposed by Massachusetts and Vermont to make health care mandatory for all residents. Even though the next presidential election is some 20 months away, virtually every candidate has strong thoughts, if not proposals, for health-care reform, including two declared Democratic candidates calling for universal health care. Whether health-care reform will go the way of Sen. Hillary Clinton's much-criticized attempt during her husband's presidential administration remains to be seen. In the meantime, hoteliers and their employee's "especially at small- and medium-sized companies "face the immediate reality of increasing costs of coverage or having no coverage at all.
In its 2002 survey of members on the topic of health-care coverage, the AH&LA reported that, of 1,429 property responses, 19 percent said they did not offer coverage to their management, and 24 percent excluded non-management from coverage. Of those who did provide coverage, 59 percent split the cost with management, and 63 percent split the cost with non-management. For hoteliers, it's a practice heavily influenced by operating costs.
Despite the robust lodging economy, expenses continue to dog operators "and employee benefits are a major culprit. As Mark Woodruff, president of PKF Consulting/Hospitality Research, explained in a November report to the industry, It's the 7.8 percent increase in operating expenses that concerns hotel owners and operators.
When analyzing the data, all expense items experienced strong increases during the first half of 2006, Woodruff explains, noting that employee benefits rose 6.6 percent between the first half of 2005 and the first half of 2006. A closer look reveals that the greatest increases in operations costs occurred in areas where management has the least control.
The only control operators have over such expenses bodes poorly for employees: Operators do have the ability to adjust the staffing of room attendants or bartenders to control costs, Woodruff concludes. Health-Care Challenges
A longtime broker and provider of insurance to the hotel industry, Sheila Hartman of Financial Independence sees several challenges to providing health-care coverage for more hotel employees. Most significant, she says, is that insurance companies typically require 75 percent employee participation from a company before they will provide coverage. At the same time, they require a minimum 75 percent coverage of the costs of insuring employees to be borne by the employer, leaving employees to cover the balance. Many providers stipulate that the minimum number of employees they will insure is 50. Consequently, Hartman sees a vicious cycle besetting employers and their employees.
Many of the employees cannot pay the 25 percent cost required of them, she says. That's why you find that a lot of management companies will only offer health care to their salaried management and not the hourly employees, because they know salaried employees are the only ones who can
afford it. If they offer it to the whole population, including hourly, they will never be able to meet the participation requirements.
That's the picture Dieter Huckestein, then president of Hilton Hotels owned and managed division, saw when he became the AH&LA chairman in 2004. Huckestein made health care a key part of his tenure by working to leverage the association's membership into greater savings. To the extent that he put health care on the table for better terms for members, he and the AH&LA were successful. Working with Aetna Inc., they were able to negotiate minimum participation and employer contributions down from 75 percent to 50 percent each.
Where the challenge for medium to small management companies lies in the Aetna plan is covering the new differential. A company may find it difficult to get 50 percent participation if the employees share of the cost contribution doesn't go down. That hasn't always happened. This is something the AH&LA recognizes and is in the process of rectifying as part of its efforts to improve the program.
On the other hand, AH&LA's prescription discount plan is steadily gaining acceptance. Through this exclusive member benefit administered by Financial Independence, employers pay 19 cents a card in bulk orders of 50 or more. The cards are given free to employees, who can then use them at participating pharmacies for savings of between 10 and 35 percent. As of February, Choice Hotels, Wyndham Hotel Group, La Quinta, America's Best Franchising and the Disney Co. had signed on to the program. America's Best Franchising was first to sign on, and La Quinta provides its corporate staff with the cards along with its franchisees. In late January, AH&LA reported that Disney had ordered 18,000 cards for its employees.
Such measures don't fully address what Hartman considers the other obstacle to broader health-care coverage for hotel workers: When companies can provide coverage for individual employees, their spouses and dependents often find it too expensive to participate. A lot of employees just cannot afford to put their families on because of the cost, she says. What ends up happening is that you have employees covered, but not the dependents.
As employers and their staffs think harder about health-care coverage, they're likely to become to fairly pragmatic. As Hartman explains, there's an 80/20 principle at work in health-care insurance: 80 percent of insured persons get by on primary care, never having to avail themselves of expensive catastrophic coverage, whether they pay for such coverage or not. If employees can accept primary, preventative forms of coverage, their premiums go way down.
Health-Care Programs
Vicki Richman, a principal of HVS/American Hospitality Management, was the first to try a program Hartman brokered in 2006 through an insurance company called Entrust. The number of hotels in the HVS/ American Hospitality Management portfolio fluctuates between 10 and 20 hotels located across the country. Finding a program that provided only one plan was topmost in its search criteria. Richman says she would have liked to try Blue Cross, for example, but the regional nature of its association structure made it an unsuitable candidate.
Our problem is, these are individual owners, but everyone is on our payroll "it's complicated, she says. We needed a plan that covered everybody, so they could go in and out, and I wouldn't have to cancel a plan when a hotel was sold or, more often than not, when a hotel came online.
They settled on Entrust because of the easy, in-and-out nature of the plan.
At HVS/American Hospitality Management, health-care coverage is divided into two plans, one for hourly line staff and the other for salaried and management workers. Richman estimates the total monthly cost per employee for single coverage at $400. For the first year, all employees contribute, $15 a month from line staff and $30 from management. After the first year, all are covered 100 percent on a single basis. The plan applies to part-time workers, as well.
Richman likes the plan because of its somewhat self-funding nature. Premium payments go into a bank account established by Entrust, and at the end of the year, Entrust assesses the volume of claims filed by HVS/ American Hospitality Management employees. If the cost of the claims exceeds the amount of premiums set aside, the management company pays the difference. If they come in under, the company's premiums are reduced proportionately in the coming year.
But, unlike a self-funded plan, we don't have to renew, Richman says. We can say Goodbye, you're increasing it too much. We don't have any exposure "there's no big hit at any point.
Richman says the company addressed the issue of spouse and dependent coverage by allowing employees on both plans to mix and match between the two. Even for the better-paid managers, paying $400 a month for family coverage is steep. So, they are able to enroll their family members on the hourly workers plan, with $100 deducted from payroll twice a month.
The Tipping Point
To borrow from author Malcolm Gladwell, health care may well be at a tipping point. While hoteliers cope with the insurance consequences of runaway health-care costs in their own market-determined fashion, a colossal collision of ideas, philosophies and ambitions looks to be in the making.
Virtually every philosophical component of health care will come under scrutiny"some people will want to further inject the federal government into the arena with national universal coverage. That's being strenuously rebuffed by President Bush, who focuses his efforts on individual responsibility.
States such as Massachusetts and Vermont aren't waiting for Washington to act and are independently pursuing strategies to switch their residents from emergency-room to preventative health care. California and Pennsylvania are considering levying assessments in the 3 to 4 percent range on companies that do not provide their workers with health-care insurance. Six other states have enacted legislation and programs to lessen the burden of insurance costs on small businesses, according to The New York Times.
Another sign of change has been minimalist Wal-Mart and feisty labor union UNITE-HERE, who in February concluded a month of secret talks with an agreement to insure more of the company's employees. Still, mostly absent from the debate, and probably a good issue for the presidential candidates, is the high cost of health care leading to increased insurance costs.
Between now and then, health-care reform will likely butt up against immigration reform "visa waivers, guest workers and general amnesty "making for an even more complicated stew.
Ultimately, as companies with employee health-care programs already know, insurance benefits make for more satisfied employees. And satisfied employees make for lower turnover, one of the costliest operating expenses. n |