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Contractors Paying Twice for Healthcare? AB 1865 is the Solution.

Imagine walking into a deli and reaching into your wallet for a $10 bill to pay for your sandwich. All of a sudden, the clerk informs you, “Excuse me, but we have a pay twice special and you will have to pay twice for your meal.” Your reaction would probably be that of dismay, bewilderment and anger; followed by a quick and empty-handed departure from the deli.

Now imagine if the Government forced you to buy lunch every day, and if you didn’t pay for it, you would be penalized. This is exactly what employers in the construction field are faced with when they are asked to bid on projects with a Project Labor Agreement (PLA). Instead of lunch, contractors are forced to pay twice for health insurance.

With the advent of the Affordable Care Act (ACA), government has now established a required standard for healthcare in our Country. In construction, non-union contractors are called “Merit Shop” contractors. The majority of Merit Shop contractors have been providing insurance for years. Already providing healthcare, it didn’t take much effort for Merit Shop contractors to ensure they met the ACA guidelines. However, contractors who work on certain public works projects are forced to pay for health insurance a second time when the work is covered by a PLA.
A PLA requires all employers on that project to pay into union trust funds for certain benefits, including health insurance for employees sent to work on those projects, regardless of whether or not the employer already has insurance.

The justification used in the past by governments for these double medical payments is that the non-union plans were not deemed “quality” health plans in many cases. While critics have charged that the process of approving those non-union plans was overly politicized, and since the implementation of the ACA by President Obama, employers now have a clear standard of “government approved” quality when it comes to healthcare plans.

With health insurance being one of the costliest benefits provided by employers, making employers pay twice for healthcare is a real problem. Today, an employer can expect to pay well over $5,000 per employee under a group health policy according to recent Kaiser Family Foundation and National Small Business Association studies. That means 10 employees working on a year-long project, will cost an employer $50,000 a year for healthcare coverage. These are precious dollars that could have been used to hire more staff, invest in new equipment, or pay workers higher wages.

Luckily, there is a solution. Assemblyman Jim Patterson (R-Fresno) has introduced AB 1865 to fix this problem. When a contractor shows proof of ACA compliant healthcare, they won’t have to pay into the union health plan. Contractors already do this with workers compensation insurance, so the addition of showing proof for their healthcare plan is a simple fix.

Since a PLA requires items like the double payment of healthcare, many Merit Shop contractors do not bid on these jobs because they cannot compete. This means taxpayers lose out on increased competition by well-respected contractors, and are stuck with higher price tags for infrastructure projects.

Employers face enough challenges putting people to work in California. Paying twice for health insurance shouldn’t be one of them. Join the Associated Builders and Contractors, our member companies, and the thousands of workers who have trained at our workforce development centers in California, in encouraging the Assembly Committee on Labor and Employment to support AB 1865. You can contact the members by visiting the committee website at The hearing will take place today, May 4th, in Sacramento, please act now!

Tami Chapman is the President of ABC of California. Associated Builders and Contractors, Inc. (ABC) is a national construction association representing more than 21,000 construction and construction-related firms with 70 chapters across the United States. With a shortage of a skilled construction workforce in California, each ABC chapter operates a workforce development training center that educates the construction workforce of tomorrow. Our employer members are united in achieving the goal of a skilled and safe construction workforce in California.