CONSTRUCTION INDUSTRY WANTS EXEMPTION FROM COBRA NOTIFICATION REQUIREMENTS DUE TO TRANSIENT WORK FORCE.

The Association says that the turnover rate for the industry is 400 percent and that the cost of providing notification to employees represents a tremendous burden on the industry. The Association asks that in the upcoming technical corrections bill, Congress place a provision which will exempt the industry from the notification requirements.

The Associated General Contractors of America (AGC) represents more than 32,000 firms including 8,000 of America's general contracting firms, which are responsible for the employment of more than 3.5 million workers. Thousands of AGC contractors provide group health insurance coverage to their employees, both through single- employer health benefit trusts and jointly-trusted multiemployer health and welfare plans.

AGC is most concerned with negative impact of the continuation of health benefit coverage requirements under the "Consolidated Omnibus Budget Reconciliation Act of 1985" (COBRA).

The Construction Labor Research Council (CLRC) recently conducted a review of health insurance coverage provided in construction industry collective bargaining agreements. CLRC's data indicated almost universal inclusion of health and welfare programs in the industry. According to CLRC's data, 95 percent of all collective bargaining agreements covering 99 percent of union construction workers provide for health care insurance. Based upon a 1982 survey of open shop contractors, conducted by the Industrial Research Unit of the Wharton School of Business, more than 75 percent of the firms provided health care insurance coverage for their employees. In the six year period since the survey was conducted, there is every reason to assume that higher demand for construction workers has resulted in an increased percentage of health care insurance coverage of employees in the open shop market.

Health benefit programs in the construction industry have been established to address the uniqueness of the construction employment relationship which is temporary and intermittent, and mirrors the nature of the construction industry's project-by-project operations. Typically, employees laid-off by one employer, because a project is complete, generally find employment with another employer. Thus, employees in the construction industry may work for several employers during the course of a year.

Given the high turnover rate in construction, often exceeding 400 percent, the cost of providing notification of certain qualifying events in order to comply with COBRA when employees have not established a permanent attachment to any one employer or have not in fact lost their health insurance coverage, is a tremendous burden on employer-maintained health care insurance programs in the construction industry.

Health insurance programs in the construction industry have been structured to address situations where workers may be unemployed between jobs. These plans provide for employees to have their paid work hours credited to their own account or "bank". Once an employee satisfies the minimum eligibility reguirements of a plan by accumulating the appropriate number of hours in the employee's "bank", the employee is then able to accumulate credit for consecutive months of prepaid, continuous insurance coverage in his or her "bank". The amount of credit hours which can be banked may range from 9 to 24 consecutive months, depending upon the particular plan. Thus an employee's eligibility for health benefits continues even though he or she may be unemployed between jobs due to the accumulation of hours in the individual's "bank". Moreover, these plan typically provide that if an employee's banked hours become depleted, the employee is allowed to continue health coverage eligibility under the plan by making self-contributions to the fund.

The unnecessary costs of implementing the health insurance coverage requirements under COBRA are astronomical in the construction industry. AGC recommends that a technical amendment be made to the upcoming tax legislation. The amendment should exclude notification of employees who are covered by a health insurance plan sponsored by employers primarily engaged in the construction industry.

Sincerely,