2017 State of the Industry Report: Health vs. wealth

State of the Industry Report - 2017 SOI

Contractors weigh the positives of offering health care coverage against the cost of it.

October 10, 2017

Several years ago, a valuable part-time employee came to Parkway Lawn Service CEO Bob Kroth with an ultimatum. The employee told Kroth he was putting in his two-weeks notice to leave the Minnesota company for another that was offering health insurance. Not wanting to lose this key employee, Kroth turned to his health insurance company to add the employee to the deal, only to find out that the coverage could only be applied to full-time workers. “

I thought it was very strange, but I talked with our broker and he said that’s basically what any insurance company would tell us,” Kroth says.

Kroth ended up keeping the employee by giving him both full-time hours and insurance coverage. But, like so many other landscaping employees in the industry, the caveat is that 90 percent of his staff that are on call throughout the winter season remain ineligible.

Can health care Boost retention?

Some business owners, like Barry Denton of Denton’s Landscaping and Nursery in Arkansas, believe offering health insurance may help attract a higher quality job candidate and may even encourage them to stay.

“In the type of work we have, we seem to get a lot of people who don’t stick with it a long time. It might help to offer health care or some other benefits as well. I’m sure Obamacare/Trumpcare has factored in with potential employees whether to take our job or another job,” Denton says.

Denton’s company doesn’t currently offer health insurance, but the company has recently added a nursery division that brought its employee totals to four full-time and four part-time employees, he says.

“I know health insurance is something that some of them might be interested in and something that we would definitely need to offer in the future if we continue to grow like we want to,” Denton says.

© Matt Collins

For other businesses, offering health care doesn’t seem to be worth the cost. A & J Complete Lawn Care in Red Bluff, California, uses a temp agency to handle payroll, workers’ compensation and health insurance for its three full-time employees, including owner Jeff Sybrant and his wife.

“Offering health insurance might attract a higher quality candidate but I don’t know that it would keep them around,” he says. “If you don’t have the passion for working outside and doing lawn care, its not going to last.”

Rusty Ruckstuhl, president of Grass Roots, estimates just two out of 30 landscaping companies in his city of Lafayette, Louisiana, pay for employee health care. Grass Roots has offered health insurance for 15 years through Blue Cross Blue Shield. Currently, his 16 employees all take advantage of the insurance. Ruckstuhl finds that it makes a big difference in employee retention.

“I have three key people who have been here a long time and they would not be here if I didn’t offer health care,” he says.

Facing the cost factor.

Ruckstuhl decided to offer health insurance after 22 years in business when it was put to a vote in the company’s profit-sharing program. “It comes out of the bottom-line profits. It’s one of the biggest line item expenses that we have,” he says.

When the Affordable Care Act was introduced, Grass Roots was grandfathered into its coverage options with Blue Cross Blue Shield. While the company’s deductibles and preferred provider organization all remained the same, Ruckstuhl has noticed a steady increase in rates ever since.

He currently pays $6,000 a month to insure employees only. Employee dependents can be added to the plan, but the company does not cover that cost.

“We probably average 42 years in age for our whole company. Anybody over 40 or 50 it’s almost a necessity now,” he says.

Utilizing resources.

Both Ruckstuhl and Kroth use an insurance broker to navigate the insurance market in their states and find them the best prices. Kroth suggests asking your liability or equipment insurance broker for a referral to someone who deals with health insurance.

“We were with Blue Cross Blue Shield, but we just had a conversation with our broker last month regarding our upcoming renewal in October and he shopped around and showed us various plans. And as it turns out, Health Partners came in as the best price point,” Kroth says.

Kroth pays about $4,500 per month for health insurance coverage for five employees and five dependents, up 10 percent from previous years. The company’s deductible has also increased from about $3,000 per person or $6,000 combined to $3,500 per person or $7,000 combined.

Legislative influence.

After the ACA was rolled out, Ruckstuhl’s discontent drove him to contact his state senator to voice his concerns.

“I rarely ever write in to my senator, but I did because I believe the laws need to change,” he says. “Hopefully they will tweak what we have in place right now and make it so we can be able to go across state lines to buy insurance and make it a competitive market.”

Kroth also finds issue with not only the Affordable Care Act, but also with local laws in Minneapolis.

Some business owners believe offering health insurance may help attract high-quality job candidates and may encourage them to stay.

The city recently passed legislation to raise the minimum wage to $15 an hour, as well as legislation requiring employers to provide sick days, one hour for every 30 hours worked, and up to 48 hours a year.

“We were offering vacation and pay equal to or better than that, and we would oftentimes offer a few days paid leave if someone was sick or if there was a death in the family,” he says. “But now that the city is requesting that of all employers, we don’t have the one-up on our competitors.”

In Lawn & Landscape’s State of the Industry report survey, 52 percent of businesses with revenues $1 million or more rated concern for high health insurance costs as an 8, 9 or 10, on a 10-point scale with 10 being very concerned. For businesses making $300,000 - $999,000, the number was 36 percent, and for businesses making under $300,000, it was 31 percent.

To ease these concerns, contractors can consult a professional adviser to see if they qualify for tax credits or subsidies and use resources like the Small Business Health Options Program (SHOP) to find an insurance plan in their state.

“We would hope there is a fair cost option out there for a small business,” Denton says. “I know that’s getting harder and harder to find.”

The author is a freelance writer based in Kentucky.