large vs. small
Not only do larger firms get lower insurance rates—about 18 percent lower for the same coverage, according to the Small Business Administration—but they’ve fared better than small ones in this downturn. Its effect on Perkins+Will, for example, was moderate: the company employs approximately 1,500 staff (down from 1,700), has not cut any benefits, and has begun hiring again, thanks to its projects in the health care, science, and technology sectors. It offers a choice of three health insurance options—a high-deductible health savings account, an in-network plan, and an out-of-network plan. The employees do share the premium costs, which are not quite 50 percent, depending on the plan they choose.
“We’re not immune to layoffs, but right off the bat we decided there were two areas we absolutely would not touch—benefits and professional development,” says CEO of human resources Meg Brown, who works in the firm’s Manhattan office. But to hedge against rising health care costs, Perkins+Will is aggressively pushing wellness programs for its staff. Services such as colorectal and cholesterol screening and well woman visits are free, and a $240 subsidy per employee—which dependents may use—helps pay for gym memberships, bicycle purchases, yoga, weight management, and Wii fitness programs.
“It’s a little too early to track how that’s working in terms of keeping claims low,” Brown says. “But we’re very transparent with our employees; we let them know when we’ve had high claims activity and encourage people to see in-network doctors.”
The Miller|Hull Partnership in Seattle is thriving, too, despite the dragging economy. Still, the 70-member firm has had to whittle away at its health care provisions in the past five years to keep paying the lion’s share of premiums. Every year it’s a painful decision, says partner Sian Roberts, AIA, LEED AP. “We’ve been faced with 20 percent annual increases and have looked at other companies and plans to keep cost increases in the 5 percent to 10 percent range.” Miller|Hull currently pays 100 percent of the premiums in a $500 deductible health care plan. Last year that amounted to $161,000, about 2.8 percent of revenues.
By comparison, very small offices face a more serious dilemma. With no leverage and a smaller risk pool, they’re vulnerable to unpredictable changes in health care costs, and often are forced to choose between covering employees and staying in business. No surprise, then, that fewer than half of companies with three to nine workers offered health benefits in 2009, according to the Employer Health Benefits survey by the Kaiser Family Foundation and the Health Research & Educational Trust.
Geoffrey Warner, AIA, who employs three people at Alchemy Architects, St. Paul, Minn., fits that snapshot. He used to be covered through his wife’s employer, but now that she works for the firm, they buy health insurance for themselves. “I’m looking forward to some health care changes that are meaningful, and hope to see some benefits from the new national policy in the next few years,” he says.
Bruce Norelius, AIA, buys health care benefits through his life partner’s plan. Norelius, a former partner at Elliot Elliot Norelius Architects, Blue Hill, Maine, moved to Los Angeles in 2008 and works by himself for now. “My partner works at a school and they have generous benefits,” he says. “I’m enjoying having dental insurance for the first time.”
In a downsized economy, small firms lose not just gifted staff but, in some states, the critical mass to qualify for group plans. Case in point is John C. Senhauser, Architect in Cincinnati, which shrank to two employees from six a few years ago. When no one would underwrite the firm, the two women joined their spouse’s plans, and principal John C. Senhauser, FAIA, reimburses their premiums. He pays $170 a month—a bargain—for his own coverage in a plan through his wife, who’s retired from Procter & Gamble, and also shells out for employee dental insurance, short-term disability, and a retirement plan that contributes up to 3 percent of their salary.
“If I had a group plan again, I’d probably ask for a percentage of employee buy-in because it’s just too expensive,” Senhauser says. “When you contribute to something, you’re a little more conscious of what things cost.” Even so, he adds: “I try to keep benefits competitive with commercial firms because residential practices can’t always keep up with them on salaries. And if you want to get the best people, you have to step up.”
California architect Georgia Kajer agrees. This year she moved home from the Pasadena office she occupied for 20 years, bringing along a remnant employee. A high-deductible Blue Shield policy for the two of them costs about $13,000 a year. In addition, she often pays cash for some of the employee’s out-of-pocket medical, dental, and vision expenses. “If it’s a hurdle, I’ll pay because I’m able to do that,” Kajer says. “He’s a single man. I have a bit more of a safety net than he does because I’m married.”
Many firm owners interviewed for this story were reluctant to discuss their benefit cuts, partly out of respect for staff. But they’re also grateful that, rather than being bitter, their employees are pulling together. Brian Lane, AIA, LEED AP, managing principal at Koning Eizenberg Architecture, says that “in a downturn it seems like the team spirit increases. They understand their work contributes significantly to our cash flow and are hanging in there and doing a good job.” One bright spot, he adds, is that the Santa Monica, Calif.–based firm’s decision not to stint on marketing is now beginning to pay off.
As more firms move out of crisis mode, will employee benefits be restored? Most architects say yes, though health insurance is the wild card. No one knows precisely what effect health care reform will have on businesses over the next five to 10 years. But for now, at least, employees should get used to picking up more of the tab.