If This Is a Boom Why Does it Feel Like a Squeeze?

AMY CONN-GUTIERREZ/AP
A man shops for washers and dryers in Plano, Texas

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THE MEDICAL MIGRAINE
No matter whether you are running a business, toiling in an office or looking for a job, you are probably feeling the health-care sting. Workers notice it in the form of higher payroll deductions and larger co-pays for prescription drugs. HMOs, which typically used to cover hospital stays in full, are adding deductibles of about $240 a visit.

In aerospace, a cyclical industry that's in a downturn, Boeing's 92,000 nonunionized employees will for the first time face payroll deductions (up to $105 a month) for health insurance. (Deals with Boeing's 58,000 unionized workers are negotiated separately.) Boeing's health costs, says spokesman Ken Mercer, are rising 15% annually and are projected to hit $2.5 billion by 2005. Boeing doesn't expect a turnaround in the airline industry until at least that year, meaning that health-care costs will probably grow faster than revenues.

Companies such as Wal-Mart have introduced variable pricing schemes. Its "associates" can choose lower payroll deductions and opt for deductibles as high as $1,000 a year. Other firms, such as General Electric, have launched variable premiums for family coverage, so that a worker pays depending on the size of his or her family. "There used to be two payment levels single and family," says Gary Sheffer, a GE spokesman. "Starting in 2004, we will go to single, two people and then three or more. And your premiums will go up as you go up that hierarchy. You pay more if you have higher use, and obviously families will have higher use." Boeing has for several years charged workers an extra $100 a month if their spouses or domestic partners who are employed elsewhere decline coverage from their employers. The drawback to such plans is that they are "administratively difficult you have to get more involved in aspects of a family life," says Barry Schilmeister, a principal with Mercer Human Resource Consulting.

A typical family health plan now costs $9,068 a year, and companies intend to ask workers to pay more next year, according to the latest survey by the Kaiser Family Foundation. The California supermarkets fear that if they don't shift more costs to employees, they will lose the ability to compete against operations like Wal-Mart, whose overall costs for goods and labor are lower. "In order for us to stay competitive, we need labor contracts that are good for both our employees and our companies," the grocers explained in newspaper ads.

Part of the problem is the growing number of retired workers. As companies or whole industries downsize, their work forces are becoming smaller than the population of retirees they are supporting, a situation that has led to soaring medical costs. General Motors now has one U.S. worker supporting 2.5 retirees, leading to a massive drain on profits. Because of such pressure, company-sponsored medical care for retirees is becoming rarer. In 1993, 43% of firms offered medical coverage to retirees who weren't eligible for Medicare. The figure last year was 34%, according to Mercer Human Resource Consulting.

WELCOME TO SPARTA
Forget the toga parties, concierge services and fruit bowls in the office. For most workers, those perks fluttered away after the Clinton boom years and probably won't return, benefits consultants say. Under the new regime, you may not be allowed to dial directory assistance at work, as some employees at Credit Suisse First Boston have discovered. Fewer companies are letting workers keep the frequent-flyer miles they rack up on business travel. DaimlerChrysler, which routinely paid $100 bonuses to corporate-sales folks who sold a car to a retail customer, has eliminated the extra cash reward; the firm has lost $1.1 billion so far this year and is under pressure from shareholders to get back in the black.

Companies are squeezing wherever they can. Compuware, a computer-services company in Detroit, eliminated its customary holiday gift of a jar of cashews to each of its 9,300 workers; that will save $500,000. The firm, which has cut wages and plans to start taking payroll deductions of $25 to $50 a month for health care, has been chipping away at other benefits too. Compuware is terminating tuition reimbursements (to save $1.4 million), and it intends to charge more for child-care services at its headquarters. "Our revenues have not been growing, so we need to reduce our expenses," says Thomas Costello, senior vice president for human resources. He says the measures have enabled Compuware to avoid large-scale layoffs, which some of its competitors such as EDS have imposed.