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In an election year, the phrase "health insurance crisis" gets tossed around the campaign trail and airwaves with regularity, but small- to medium-sized hotel managers say there is less of a crisis and more coping going on. The same can generally be said about workers' compensation insurance, with a few exceptions.

The primary health insurance challenge faced by most management companies is that they do business in multiple states. Unless they are able to negotiate a unified policy with the insurer, they end up with several small pools of insurable workers, which require separate policies at a higher cost.

Beyond that, many entry-level employees decline the coverage, sometimes because they are already insured by spouses, sometimes because they don't want to pay the health insurance premiums, and this, too, reduces the pool of insurable employees, driving up the cost of the policy.

"Obviously, size is a problem, getting enough participants to have a large enough group is always a factor," according to Gerald Petitt, president and c.e.o. of Creative Hotel Associates, which is based in Rockville, Md. He said the company sends its health insurance out to bid every year, but continues to be covered by one of the largest insurers, Blue Cross/Blue Shield.

Petitt said his preference would be to provide health insurance that stresses catastrophic coverage as opposed to comprehensive, "but that's swimming upstream in today's environment."

The goal of going the noncomprehensive route would be to bring the cost of health insurance down to where more entry- level employees can afford it, he said.

"We have a lot of entry-level employees and many of them choose not to take the plan for even $5 out of their check," Petitt said.

Some companies find some success in offering health insurance to a higher percentage of its employees, according to Tom Jackson, president and c.e.o. of Hospitality Hotel Group in Harrisonburg, Va.

"As a company, we made it more accessible to more employees, so we softened a lot of our rules," he said. Better-insured employees, Jackson reasons, are easier to retain and require less training.

Once a company makes the commitment to offer a broad health benefits package, it can become a matter of vendor management. Seattle-based Dow Hotel Co. was able to unify its health insurance policy in 2002 for the states it does business in. Now, from year to year, it is faced with managing costs while keeping benefits fair and consistent.

Louis Sanford, Dow's chief financial officer, said he talks to Marsh, which brokered Dow's Blue Cross/Blue Shield policy, about two or three times a month.

"With vendors, we are as competitive as anybody, and like any company, we want more for less, yet we want this to be a longer-term relationship," he said.

Sanford said the biggest challenge with providing health insurance is rising costs, of both medical care itself and the insurance. Decisions are made on a year-to-year basis to manage costs or swap benefits. On one hand, the company took vision coverage out of its medical plan, but employees pay half of what other hotel workers in the area pay for their coverage.

The skyrocketing nature of health insurance costs can be seen in a company like Memphis-based Cooper Cos., which manages 22 hotels in nine states.

"We were ahead of the curve when we went self-insured on the entire employee base," said Pace Cooper, president and c.e.o. "But now, whatever we do, [the cost] keeps getting away from us."

The company is still self-insured, thus avoiding the pricing whim of brokers and insurers, but this year has had to charge employees for the first time, about $25 per month.

Like many employers, Cooper has found it necessary to offer fewer benefits to keep the cost of providing health insurance down.

"We can't afford to do as much as we would like to," he said. "It's frustrating to try to stay ahead."

California trends

California hotel owners and managers might be faced with mandated health coverage depending on the outcome of a November referendum. Just before losing the 2002 run-off election to Arnold Schwarzenegger, former California Gov. Gray Davis signed a bill requiring businesses of 20 employees or more to provide health insurance or pay a hefty tax toward a state-run insurance plan.

Jim Abrams, president and c.e.o. of the California Hotel & Lodging Assn., said the bill would be enacted if the referendum fails.

"About 50 percent of Californians want to keep the Gray Davis law intact, which [is a] spooky number," he said.

California also is the nation's hotbed for workers' compensation insurance. Measured in dollars per $100 in salary, California leads the nation in workers' comp rates, charging an average of $6.33 per $100. Those rates are amplified for hotel workers, whose workplace is fraught with sharp tools, concrete floors and repetitive tasks.

"[In California] if you are a good innkeeper, you can keep the rate at $11 [per $100] or $12 [per $100]," Abrams said.

But in the worst case, hotels insuring through the state compensation insurance fund (the insurer of last resort) were paying about $30 per $100. Reforms are leveling the playing field, improving the rates for most hotel operators, but at the same time increasing benefits to severely injured employees, he said.

Outside of California, the leading workers' comp concern for hoteliers seems to be the occasional case of insurance fraud. Petitt has seen employees whose background checks revealed they filed comp claims "everywhere they have worked." Cooper recalls one former housekeeper who was being compensated for a back injury but was later found by a private investigator to be working as an exotic dancer.

hmm@advanstar.com