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Employers struggle with health care costs

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Workers may be struggling to stretch their paychecks. But employers are facing their share of problems, too.

The price of doing business in this recovery --- namely financing workers' pay and benefits --- has jumped substantially for business owners like Gerry Harkins.

Providing health care coverage for the 250 workers at his Lithonia construction company, Southern Pan Services Co., has become a steep and challenging proposition. Health care costs at his company have jumped 35 percent in the past three years. It's Harkins' single biggest bill aside from workers' compensation and Social Security.

The company has been through its share of industry recessions and recoveries --- two in the past 10 years --- but health care costs weren't as big a problem as they are now.

Nationally, compensation costs have risen 4 percent this year, largely as a result of significantly higher health care costs.

"Health care costs weren't as significant in past recessions," said Harkins, chief financial officer and co-owner of Southern Pan.

A survey in August 2003 by the National Federation of Independent Business found that 86 percent of the group's membership cited rising health care costs as their biggest concern.

"They're having to make employees pick up some of the costs, raise the deductible, or change and shop around and try to get another coverage. Or they can't offer it all," said Melody Harrison, state director of the 13,000-member Georgia NFIB.

The small-business group is trying to get associated health care plans passed at the federal level. The idea --- which would allow small businesses to shave costs by buying into a group health plan similar to self-insured firms --- passed the House but not the Senate this year.

Meanwhile, Southern Pan has had to pass on some of its costs to workers and their families. Workers now pay more on their deductibles, co-pays and out-of-pocket expenses. Family out-of-pocket expenses, for example, are now $4,000 instead of $3,000.

"They don't like [the extra cost]," Harkins concedes. "They complain about it."

The company has increased wages at or about the level of inflation so that workers don't lose ground financially, Harkins said. "That way, workers have the same buying power that they had, say, three years ago."

Harkins is used to the economic ebbs and flows that accompany the construction industry.

"This is a cautionary period," he said. "You want to be as productive as you can and keep costs down. Our profit margins are lower. If we can get through this period as demand starts catching up with supply, prices will go up and demand for workers will go up."

In the meantime, even Harkins isn't personally immune from the financial balancing act. He drives the same sport utility vehicle he's had for a while, and he lives with his wife in a house they've owned for many years.

"So we have a relatively small mortgage," he said. "We don't live an extravagant lifestyle."

Copyright 2004 The Atlanta Journal-Constitution

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