Rising Health-Care Costs at Heart of Labor Strife

When Southland supermarket workers went on strike Saturday, their main beef was an employer proposal to cut back their health plan. Mechanics with the Metropolitan Transportation Authority are squawking over the same thing. And health benefits are key to the contract fight that has prompted a sickout by Los Angeles County Sheriff’s deputies.

Around Southern California and across the country, attempts by employers to curtail medical benefits have become the top issue in labor contract talks, setting off a wave of strikes and other job actions that are likely to escalate as health insurance costs continue to balloon.

“It’s at the core of every major contract struggle,” said Kate Bronfenbrenner, director of Labor Education Research at Cornell University. “And it’s going to be an issue until we see some national solutions.”

In fact, at least half the strikes in California this year have been staged over health benefits, according to Ken Jacobs, a researcher at the UC Berkeley Labor Center. He counted 11 such work stoppages in a four-month period this year in Northern California.

They have affected the public and private sector, small and large employers, skilled and unskilled workers. At a Dodge dealership in Colma, 15 mechanics are walking the picket line to fight for their health benefits. In Southern and parts of Central California, 70,000 supermarket workers are doing the same.

Those workers join wireless technicians, auto workers and other union members nationwide who have agreed to wage freezes and plant closings but draw the line at paying more for health insurance.

Michael Rosales, a Ralphs meat cutter for nearly three decades, has a daughter who seven years ago was found to have a brain tumor. “To this day,” Rosales said, “she’s on medication that would probably break us without this plan. That’s why if I have to stand on a picket line to fight for these benefits, I will.”

There are scores of stories like his among the pickets in front of Vons, Pavilions, Albertsons and Ralphs stores from San Luis Obispo to the Mexican border. A mother whose two young children suffer from kidney problems. A diabetic. A cancer survivor.

They speak gratefully of a health plan that they know is among the finest in the country for hourly service workers. Those benefits, many say, have kept them on the job and loyal to their companies despite unpredictable part-time hours.

Employers, however, say health-care cost increases are so extreme that they can no longer afford to soak them up unilaterally. The supermarket chains, in particular, say they are facing a double whammy of soaring insurance premiums and intense pressure from nonunion retailers to lower their prices.

“It doesn’t surprise me that the union is trying to hang on” to such rich benefits, said Jim Foreman, managing director of health and welfare for Towers Perrin, a New York-based human resources consulting firm. “But it’s just not realistic. No employer can continue to absorb the double-digit increases we’ve seen in health-care costs over the past few years or expect to pass them along to customers.... The [profit] margins, especially in the grocery business, just aren’t high enough.”

Still, many of the grocery workers represented by the United Food and Commercial Workers union view the markets’ proposal to cut health benefits as a betrayal, a reneging on a deal. Through decades of hard bargaining and strikes, the UFCW in Southern California won what is widely regarded as a Cadillac contract.

Workers pay no premium for full family health insurance -- a perk enjoyed by workers at only 4% of large employers nationwide, according to a survey by the Kaiser Family Foundation, an independent research group not affiliated with managed-care provider Kaiser Permanente.

The benefit is particularly unusual for the retail industry, whose wages and benefits tend to lag behind those of other industries, according to the study’s author, Gary Claxton.

“It’s extremely uncommon,” Claxton said. “It’s hard to think of any industry [that supermarket workers] could go to ... to get that good a health insurance package with no contribution.”

The big supermarket chains -- Ralphs parent Kroger Co., Albertsons Inc. and Safeway Inc., which owns Vons -- pay their health-care contributions into a trust fund that is jointly administered by the union and the companies. Through recent contracts, the employers have pledged to contribute whatever it takes to maintain benefits at current levels. These include dental and vision care, as well as a full health plan at Kaiser or through another HMO.

The amount of contributions has fluctuated in the last decade, with cost-containment measures such as limiting chiropractic care added over time.

According to UFCW officials, the employer contribution in 1993 was $3 per hour per employee, compared with $3.85 per hour per employee now. That’s an average 2.5% annual increase -- far below the national rate of health-care inflation. The way the union sees it, this shows that the supermarkets can afford to provide the same level of benefits they always have.

But the companies view the situation much differently. They point out that their required contribution to the health plan fell during the mid-1990s, a period in which medical inflation was held in check. When the last contract was signed with the UFCW, their share amounted to $2.44 per hour per employee -- meaning their contribution has jumped 58% in the last four years.

Today, the supermarkets are trying to cap their hourly contributions. Their proposal calls for a far lower rate of growth than the 13% annual increase projected for health-care costs. The union estimates that under this arrangement, the fund would have to cut benefits for members or raise deductibles drastically.

Rick Icaza, president of UFCW Local 770 in Los Angeles, said workers could lose dental and vision benefits, and might have to pay 50% of the cost of doctor visits, drugs and hospital stays. Union members also would have to contribute to premiums for the first time, at least $780 a year for family coverage.

Icaza said that’s a non-starter in negotiations.

But someone will have to pay. Health-care premiums nationwide have grown at double-digit rates in recent years -- 13.9% this year -- far outstripping the overall pace of inflation, which is running at just over 2%, according to the Kaiser foundation survey.

Experts say a host of factors are driving the rapid increase. Consolidation in the health-care industry has reduced competition, giving medical providers more leverage in pricing negotiations with employers and insurers. New drugs to treat everything from depression to impotence have spurred consumer demand for prescriptions.

Technology has played a role. “It used to be an X-ray was fine. Now everyone wants an MRI,” Foreman, of Towers Perrin, said. “We’re all paying for that.”

To cope with the rising costs, Foreman said, employers are requiring workers to shoulder a bigger share of the financial burden, from higher co-pays and deductibles to paying a larger percentage of premiums.

The typical family health insurance policy provided by an employer costs $9,068 a year, according to the Kaiser survey, with the average worker picking up 27% of the tab, or $2,412. That’s a 50% jump over the last three years.

In California, employer premiums rose 13% from 2001 to 2002, said Jacobs of UC Berkeley. In that same time, worker contributions jumped 32%, he said.

Some employers are cutting health insurance altogether, or raising premium contributions to a point where workers are no longer taking the benefits.

In 2002, the number of Americans who lacked health coverage rose 5.7% to 43.6 million, the biggest jump in a decade, according to the Census Bureau. The largest part of the increase came from people losing coverage through the workplace.

In 2001, more than 6 million Californians lacked health insurance at some time during the year, the majority of them working people and their families, according to the UCLA Center for Health Policy Research.

Health benefits are one strong advantage unions offer to workers, and they fight hard to keep them.

“This is a major issue,” said Dan Garces, executive director of the Los Angeles Sheriff’s Professional Assn., noting that his union’s members are facing a large jump in the cost of basic health coverage, from virtually nothing to $972 annually. Trying to preserve medical benefits “comes before their pay.”

In 2002, unionized workers in California were 42% more likely to be covered by health insurance than those who were not in unions, Jacobs said. The next few years could determine whether unions maintain that advantage or lose one of their strongest selling points.

To reduce competitive pressures on their own employers, unions are pushing nonunion companies to offer health benefits to workers. That would eliminate a key argument made by supermarket chains in this latest contract battle. The companies say Wal-Mart Stores Inc., which soon will sell groceries in California, and other nonunion grocers are setting a new, lower market rate for labor -- and they have no choice but to match it.

Such arguments prompted organized labor to lobby for a new law that would require businesses with more than 20 workers to provide health-care coverage and pick up 80% of premiums, or pay into a state fund that would do it for them. Under the new law, businesses with 200 or more employees would have to provide coverage for workers and their families beginning in 2006. Smaller firms gradually would be required to offer similar benefits.

Lawmakers say the legislation would extend health-care coverage to 1 million uninsured Californians. But businesses have said it was a job killer that would discourage companies from growing and hiring.

In the end, said Jacobs of UC Berkeley, the law would help the state cope with rising health-care costs by relieving some of the burden of caring for the uninsured. The law, said Jacobs, “is designed to level the playing field up, rather than down.”

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Times staff writers Kurt Streeter and Andrew Blankstein contributed to this report.