CWS 3.0: May 31, 2011 - Vol.3.13

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Perspective Column: Affordability of Health Insurance for Temps

From Washington, to Wall Street, to Main Street, the availability and affordability of health insurance coverage is a topic discussed widely and frequently in the United States these days. According to a 2010 Census Report, the number of people without health insurance rose by 4.3 million in 2009, to a total of 50.7 million. This trend is largely attributable to the spike in the unemployment rate that began in mid-2008 and continued through much of 2009. Millions of unemployed workers quickly found themselves unable to afford COBRA premiums or other non-subsidized healthcare coverage.

The full cost of self-purchased health insurance is eye-opening to many who previously benefitted from employer-subsidized benefits. A 2010 Report from the Kaiser Family Foundation indicates that the average annual cost of health insurance premiums, deductibles, and out-of-pocket spending for a family who buys their own health insurance coverage is $9,790. For a household with annual take-home pay of $50,000, this equates to spending nearly $1 on healthcare for every $5 in net earnings. On average, the same coverage received through an employer-sponsored program would cost the family about 70 percent less.

These numbers certainly motivate many workers to seek direct employment with an organization to take advantage of premium subsidies. As the economy continues to heal and unemployment eases, workers will find themselves with increased employment options. So what impact will this have on the ability for temporary staffing agencies to attract and retain talent, and on the companies that rely on external labor to complement their workforce? The most accurate answer is probably “it depends.”

For staffing and outsourcing firm Spectraforce, offering highly subsidized health insurance to its contract employees is critical to attracting quality workers. “In the technology field, it’s difficult to get good talent.” says CEO Amit Singh. “A lot of people come with the requirement of good healthcare coverage.” Spectraforce once subsidized 95 percent of every employee’s healthcare premiums. “But,” continued Singh, “the reality is that it’s not possible to pass the entire cost on to our customers, and our higher operating costs put us at a competitive disadvantage.” The company had to find a better balance between offering an enticing benefit and running a profitable business. Today, Spectraforce still provides a 90 percent subsidy, but only after workers have been with the company for a certain period of time.

Singh notes that the need for health insurance coverage isn’t the same for all temporary workers, and neither is its financial impact. “For positions at lower bill rates than those for IT workers, it just wouldn’t be feasible to offer the same benefit because the premium costs would be disproportionate.” Singh said.

Indeed, the availability or absence of employer subsidized healthcare coverage becomes increasingly impactful for lower paid workers. As the numbers cited above by the Census bureau indicate, millions of people are forced to cross their fingers and make do without insurance. Others rely on the coverage provided by a spouse’s employer. According to the Bureau of Labor Statistics (BLS), 51 percent of middle income families have dual earners in the household. It stands to reason that this gives those families increased flexibility for one of those family members to consider positions without healthcare benefits.

These two primary factors: reduced financial impact of health insurance costs for many higher skilled temporary positions, and temporary workers who rely on a family member for employer-sponsored health insurance coverage, minimizes the impact that health insurance has on the supply of temporary workers. Even if the pace of economic recovery picks up steam and the labor market tightens to pre-2008 levels, a lack of employer-sponsored health insurance, and the higher cost to purchase “full price” health insurance, should have a negligible impact on the size or quality of the non-employee workforce.

Ben Walker is a senior associate with Brightfield Strategies, which consults with Fortune 500 companies on contingent workforce strategy initiatives. He can be reached at bwalker@brightfieldstrategies.com.

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