Washington Way - Engine Builder Magazine

Washington Way

Finding and retaining good service technicians and other employees has become an increasing problem in the parts and service aftermarket. There just aren’t enough competent individuals available and the cost of salary and benefits for all employees keeps increasing. Small firms, in particular, may have problems because of the ever-increasing costs of competitive salaries and benefits.

Health care coverage can be a major problem. For many long-term and older employees the health care benefits provided by an employer may be as important as the salary they are paid. However, rising health care insurance costs are forcing many aftermarket companies to cut back on health care benefits by reducing plan coverage, increasing deductibles and limiting contributions for premiums. While such actions are necessary, they make employment at small firms less attractive than at larger companies which can offer greater health care coverage – many times at a lower cost.

There are many reasons for the high costs which small employers pay for employee’s health care insurance. Lack of bargaining power, a small employee base over which to spread the risk and administrative costs, and the insurer’s lack of motivation to deal with low profit, small employer plans and restrictive state laws, all contribute.

Now, however, the U.S. Congress may be doing something to help the small employer with his health insurance costs. Last summer, the U.S. House of Representatives passed the Small Business Health Fairness Act. This Act would allow trade, industry and professional associations to offer Federally regulated employee health care plans to their members located throughout the U.S. Currently only large companies and unions can offer plans, which insure employees across state lines and which are subject to Federal, not state, requirements. This privilege allows them to create economies of scale and risk unavailable to the small employer. It also makes them subject to the more liberal provisions of Federal laws on health care plans, which also reduces costs. If the Act becomes law, trade associations will be able to offer Federally regulated insurance plans for the employees of their members.

By establishing a national plan for its member employees, the associations will have a large enough pool of potentially insurable employees to attract the lowest rates and best benefits. An association plan available to many small employers will create the economies of scale and risk reduction that are unattainable by small plans operating independently. Currently, small businesses pay on the average about 18% more per year for employee health care coverage than larger companies. Under the new Act this discrepancy could be significantly reduced or even eliminated.

Qualification of trade association plans under the Act is not automatic. The plans must meet certain requirements and be certified by the Secretary of Labor, but these requirements are mainly to ensure that the plan is well funded and available only to employees of members of the association. If the Act is passed, major insurers will have a strong incentive to team with trade associations to offer competitive plans at favorable rates.

The Act must now be considered by the U.S. Senate before it becomes law. Currently, it is languishing in the Senate Committee on Health, Education, Labor and Pension. No hearings are planned and the Committee has not scheduled a date for the Act’s consideration. However, the Act has bi-partisan support in Congress and is favored by the Bush administration. In March a coalition of motor vehicle associations wrote each Senator urging support for this bill. With continued efforts this Act could pass before the end of the year.

Momentum also seems to be building behind the right to repair legislation pending in the US Congress. The Motor Vehicle Owners’ Right To Repair Act (HR 2735), which was originally introduced in 2001 and re-introduced last year, now has more than 100 co-sponsors in the House of Representatives. At the end of February a companion bill (S 2138) was also introduced in the Senate by Senator Lindsey Graham (R – SC).

The House bill is currently pending in the Subcommittee on Commerce, Trade and Consumer Protection and the Senate bill is before the Committee on Commerce, Science and Transportation. Watch for news on these soon.

Mike Conlon is legal counsel for the Engine Rebuilders Association (AERA) and the Automotive Parts Rebuilders Association (APRA). He is an attorney with the Washington, DC, firm of Conlon, Frantz, Phelan, Knapp & Piers.
[email protected]

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