Health Insurance Basics

Despite all our efforts to create safe, healthy jobsites, accidents do occur and people do get sick. If you want a career in construction, or you’re thinking about starting your own construction company as a sole proprietor or with a small crew, you have to think about health insurance.

If you’re young and single, you might skip health insurance altogether and charge full steam ahead into your own business. If you’re married and have children, you may decide not to start your own business at all. If your spouse works and receives health insurance from his or her employer, you’ve hit the lottery. Forbes reported in May 2023 that the average monthly premium for a family in the Affordable Care Act Marketplace ranges between $928 for a bronze plan, $1,217 for a silver plan, and $1,336 for a gold plan. One thousand dollars a month is $540,000 over a 45-year career. That’s lottery-type money. For us small-time business owners, government-provided universal healthcare starts to look pretty good, but until that day comes, if ever, the ACA Marketplace provides a variety of health insurance plans (healthcare.gov).

Healthcare in the Construction Industry

Construction workers are more likely to lack health insurance than workers in any other industry, according to CPWR - The Center for Construction Research and Training, the nonprofit construction safety and health research and training arm of the North America’s Building Trades Unions. In its April 2020 Data Bulletin, CPWR reported that the percentage of construction workers who were uninsured was 24.6% in March 2019, down from 33.1% in 2012. The decrease was a result of better access, affordability, and discounts from the passage of the Affordable Care Act—yet, still, 1 of every 4 construction workers has no health insurance. For the same period, CPWR reports, the uninsured rate for all industries was 10.9%. Members of construction unions and construction workers employed by large companies are more likely to have health insurance than sole proprietors or those working for small construction companies of 10 or fewer employees. Union members are also more apt to have their health insurance premium paid in full: 47.3% vs. 21.7% for non-union members.

Health insurance in the United States is an employer-based system, unlike in most other western industrialized countries, where citizens have a universal healthcare system—a safety net that provides basic healthcare. In a country with a universal healthcare system, if you’re lucky enough to have additional funds, you can augment what the government provides with private medical services.

How did the United States develop an employer-based healthcare system? Before 1942, there were such products as accident insurance, though they were intended more as compensation for lost wages than as a payment for medical expenses, and sickness insurance, sold by hospitals. Then, during World War II, Congress passed The Stabilization Act of 1942, also referred to as the Inflation Control Act, which authorized the president to stabilize prices, wages and salaries to offset the influences of a world war on the U.S. economy. However, the Act excluded controls on worker benefits including “insurances and pension benefits in a reasonable amount to be determined by the President.” Because of wage controls and a limited work force due to the war, employers began to offer healthcare benefits and pensions in an effort to attract and retain workers.

Over the next several decades, a strong middle class developed thanks to a good job market, the GI Bill, union membership, and a corporate philosophy that included healthcare as an integral part of compensating employees. Unfortunately, corporate philosophy changed and healthcare costs began to increase.

Fast forward to 2023 and many U.S. employers that used to provide full healthcare insurance and a pension plan now provide a high-deductible health plan that requires employee participation and a 401(k) retirement plan with a single-digit percentage match. The burdens of healthcare insurance and retirement saving have been passed from the employer to the employee. Construction workers and the middle class have taken a big hit. —R.C.

The Marketplace is designed for people to compare and buy insurance plans. It has four categories of healthcare plans: bronze, silver, gold, and platinum. Bronze plans are high-deductible health plans (HDHP) with low premiums. Platinum plans have the highest monthly premium but pay the most for medical care. (Very few platinum plans are available on the Marketplace platform or directly from insurers.) If you’re healthy, a bronze plan may be your best option. If you have a lot of medical expenses, a higher-premium gold or platinum plan may be less expensive in the long run. The four levels of plans are differentiated based on their actuarial value, which measures the generosity of benefit coverage. The higher the actuarial value, the more the plan will pay. The actuarial value of each plan is as follows: a bronze plan covers 60% (policy holder pays 40%); silver, 70%; gold, 80%; and platinum, 90%. When you review plans in the Marketplace for purchase, it’s important to understand premiums, deductibles, copayments, coinsurance, and out-of-pocket maximum. We can use a discussion of a bronze plan to illustrate each.

Beyond Premiums

More than one-third of all health insurance plans, public and private, in the United States are high-deductible plans. In 2021, 55.7% of private-sector workers were enrolled in them, according to a report by ValuePenguin, a division of LendingTree. High-deductible plans are exactly what their title suggests: They have a higher deductible and a higher total out-of-pocket expense in exchange for a lower monthly premium. They best serve people who are generally in good health and don’t need a lot of medical services. In a personally healthy year, you will pay your premiums and little else, but, if by chance you are taken ill, you will have to pay up to the plan’s deductible before the plan pays anything.

For example, for 2023, a bronze high-deductible plan has a minimum deductible of $1,500 for an individual and $3,000 for a family, and has a total out-of-pocket cost of $7,500 for an individual and $15,000 for a family.

After meeting the $1,500/$3,000 deductible, you will have reached the copayment/coinsurance part of a plan. At that point, either you’ll pay a fixed amount, or copayment, for a service—say, a $35 copay for a doctor’s office visit; or you’ll pay a percentage of the cost, or coinsurance—say, you pay 20%, or $200, of a $1,000 hospital visit while the insurance company pays the other 80% (some plans may have a different split from 80/20). The copayment/coinsurance applies until you spend another $6,000/$12,000, bringing you up to the out-of-pocket maximum. Once you hit that, the insurance company will pay all medical expenses until the next year, when the clock starts all over again. So, if you have a lot of unforeseen medical issues in a year, your healthcare costs with a high-deductible plan might be more than expected.

And, don’t forget, on top of the dollars discussed above, you still have monthly premiums to pay. Premiums for a bronze plan can cost a 30-year-old individual $430 per month ($5,160 per year) and a family $928 per month ($11,136 per year). In a bad year, a family would shell out $15,000 in out-of-pocket costs plus $11,136 in premiums for a total of $26,136.

By comparison, a gold plan may have a family monthly premium of $1,332, a deductible of $2,500, and an out-of-pocket maximum of $8,500. Total out-of-pocket costs for a gold plan in a bad year would be $15,984 in total monthly premiums plus $8,500 in out-of-pocket costs for a total of $24,484, compared with $26,136 for the bronze plan. However, in a good, healthy year with no medical expenses, a gold plan would run $15,984 in premiums while a bronze plan would cost just $11,136 in premiums.

In-network vs. out-of-network. Has your head exploded yet? No? Let’s work on that. In addition to the four tiers discussed above, you need to decide what type of plan you want: one that uses the insurance company’s in-network healthcare services of doctors, hospitals, pharmacies, and specialists or one that allows you to access out-of-network services. You should be able to find in-network or out-of-network plans for each “metal” level. Examples are:

Exclusive Provider Organization (EPO). This care plan requires that medical services be obtained from within the insurance plan’s network of doctors, specialists, and hospitals. Only emergency care is exempt.

Health Maintenance Organization (HMO). An HMO is similar to an EPO. It limits coverage to doctors who work for or are contracted with the HMO. An HMO may require you to live in its service area to qualify for coverage. Emergency care from outside the network is covered.

Point of Service (POS). With this plan, you pay less if you use in-network services and providers. You need a referral from your primary care physician to see a specialist, and you pay more for out-of-network services.

Preferred Provider Organization (PPO). You pay less if you use in-network services, but you can use out-of-network services and specialists without a referral—for additional cost.

ACA-required benefits. Regardless of the metal tier or type of plan you select, certain essential benefits will be covered. A deductible, copayment, and coinsurance may apply, but the service cannot be denied. For an insurance company to participate in the ACA marketplace, these essential health benefits must be covered:

Addiction treatment
Ambulatory patient services
Birth control
Care for newborns and children
Emergency services
Hospitalization
Laboratory services
Maternity care
Mental health services
Occupational and physical therapy
Prescription drugs
Preventive and wellness services

One thing is clear about healthcare for the little guy in the United States: You pay. You pay upfront via premiums, or you pay on the back end via total out-of-pocket costs. Healthcare in our country is less a healthcare system than it is a health insurance system.

Government subsidies. So, how does a would-be entrepreneur in the construction trades, or any field for that matter, start their own business, create jobs, and make any money when health insurance is so expensive? Our economic system depends on people starting their own businesses, growing their businesses, employing others, and stimulating local economies. There is assistance available. In addition to providing health insurance plans, the ACA Marketplace offers federal subsidies to those who qualify. If Tesla, GM, and Ford don’t hesitate to take a $7,500 subsidy from Uncle Sam for each electric vehicle they sell, why should you hesitate to help your family and your business?

Cost sharing. Government health insurance assistance includes Cost-Sharing Reductions to lower out-of-pocket costs and Advanced Premium Tax Credits to lower monthly premiums. This assistance may make insurance affordable or might make a better plan more affordable. During the Marketplace’s open enrollment period, October 15 to December 15 (though this varies by state), you open an account and fill out an application, and the Marketplace will tell you if you qualify for assistance. If your income falls between 100% and 250% of the federal poverty level, you may be eligible for cost-sharing assistance, which can lower your deductibles, copayments, and coinsurance. You must purchase a silver plan to qualify for cost-sharing.

Tax credit. To qualify for a premium tax credit, your income needs to be between 100% and 400% of the federal poverty level. Based on 2023 poverty levels, the income amounts for a family of four are $27,750 minimum and $69,375 maximum for cost-sharing, and $27,750 minimum and $111,000 maximum for a premium tax credit. The minimum and maximum for assistance will vary by family size. The minimum and maximum for a premium tax credit varies from $13,590 to $54,360 for household of one to $46,630 to $186,520 for a household of eight.

Also, the ACA has a plan for small businesses. Small businesses, 1 to 50 employees, can participate in the Small Business Health Option Program (SHOP). SHOP plans are a way to qualify for Small Business Health Care Tax Credits.

Summing Up

Is healthcare a basic human right? Would the construction industry benefit from universal healthcare or Medicare for all? These are tough questions to answer and way above my pay grade. As a citizen concerned about my fellow workers and countrymen, yes, I would love for all of us to have access to good, affordable healthcare and to a healthcare system that educates and encourages healthy behavior (which has been found to have more of an effect on life expectancy than access to healthcare). We have the best healthcare professionals in the world and spend twice as much as other western industrialized countries, but we do not provide the best healthcare for our citizens. According to the CDC National Center for Health Statistics, 28 million Americans did not have healthcare in 2021. Many of them were in the construction trades. Would the construction industry and the country benefit from a better, more-affordable system? I have to say, yes. All workers and citizens would be covered, and a portion of the money saved by each family would find its way into homeownership and home improvements.

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