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James Fitzgerald

AB 842: Stop Employers from Double Paying for Health Care

Imagine walking in to pay for your morning coffee and you reach into your wallet to grab your normal $2.35. All of a sudden the barista informs you, “excuse me but we have a pay twice special and you will have to pay twice for that coffee.” Your reaction would probably be that of dismay, bewilderment and anger; followed by a quick and empty handed departure from the coffee shop.

Now imagine if the Government mandated you to buy a cup of coffee every day and if you didn’t pay for it you would be penalized. This scenario is exactly what employers in the construction field are faced with when they are asked to bid on projects with a Project Labor Agreement, but instead of coffee, 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, simply because employers that don’t provide these benefits, risk losing their skilled craft professionals that make their business successful and competitive. Since, most of us were already providing healthcare it didn’t take much to make our health plans ACA compliant.

However, contractors who work on certain public works projects are mandated to pay for health insurance a second time when the work is covered by a project labor agreement (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 the fact the employer already has insurance.

The justification in the past by governments for these double medical payments is that the non-union plans are not deemed “quality” health plans in many cases. While critics have charged that the process of approving those non-union plans was overly politicized in the past, 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 $6,000 dollars per employee under a group health policy according to recent Kaiser Family Foundation and National Small Business Association studies. That means on a project with 10 employees working on a year-long project, it will cost an employer in construction $60,000 a year. 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. Assembly Member Jim Patterson (R) has introduced AB 842 to fix this problem. When a contractor shows proof of ACA compliant healthcare they will be exempted by the awarding body from paying 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.

PLA’s are becoming more and more prevalent on public works construction throughout the State. Just last year the legislature mandated a PLA on a water tunnel project being constructed by the Monterey County Water Resources Agency (AB 155 Alejo). Also, local jurisdictions are discussing an ever increasing number of PLA’s.

Since a PLA requires items, like 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, and encourage the Assembly Committee on Labor and Employment to support AB 842. You can contact the members by visiting the committee website at The hearing will take place on May 6th in Sacramento, please act today.

James Fitzgerald 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.