Health Care Restructuring and the Construction Industry

Now that President Obama has signed both the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act, contractors have two separate but related issues to focus on. First, what are the requirements, risks and opportunities for employers? Second, how will the legislation change the demand for different kinds of structures? Initially, all employers are likely to bear one-time costs to learn about their duties and options under the new law. The longer-term impact will vary greatly by employer size (small firms get some relief), whether and what sort of health coverage a firm currently offers (either directly or through a union agreement), the age distribution of its workers, whether it self-performs or subcontracts most of its work, and a variety of other factors. Although many employers fear added health care costs will cut into profits, over time the costs will largely come out of workers' pay or other benefits. Unless a benefit makes a worker more productive, employers in any industry will not be willing to spend more on total compensation for a given level of work hours. However, the law may cause firms to change their employment count or mix of full-time and part-time workers. The demand for hospitals, medical office buildings, clinics and other medical facilities might seem to be helped a great deal by a law that is advertised as adding 32 million individuals to the health insurance system. However, some of these individuals are either minor users of health providers (for instance, healthy young adults) or have already been receiving care through emergency rooms and free clinics. Also, it is not clear if reimbursement rates for hospitals, specialists and other providers will be high enough to lead them to add to their facilities. Representatives for one category of facilities-physician-owned hospitals-say the law will stymie their growth and may put them out of business. It seems likely that health care construction will rise initially. But if the legislation succeeds in capping the growth of health care spending over time, construction may not rise relative to prior law. Meanwhile, higher taxes on some businesses and high-income individuals, combined with reduced health insurance or health care costs for other businesses and individuals, will change demand for other types of construction in ways yet to be foreseen.