The National Association of Home Builders (NAHB) reported late Monday that a last-minute provision added to the U.S. Senate’s health care reform bill could derail housing industry recovery going forward.

In a rush to pass a massive heath care overhaul before Christmas, by acquiring 60 votes needed to get the bill past the Senate, a provision was added into the health care bill that would require construction industry firms to provide health insurance if the company employs more than five workers. The same mandate is made for big businesses, though all other small businesses, with the exception of the construction industry, would be exempt from providing mandatory health coverage if they employ fewer than 50 workers.

“This narrow provision is an unprecedented assault on the construction industry and unjustly targets an industry trying to keep its doors open during the worst housing downturn since the Great Depression,” said NAHB Chairman Joe Robson, a homebuilder from Tulsa, Okla. “If this provision were to be enacted into law, it would prove to be catastrophic for the home building industry. In short, this is a true jobs killer. Thousands of small builder firms struggling to stay afloat could go under. We strongly urge the Senate to reconsider and pull this onerous provision that threatens the viability of small home builders across the nation.”

The Merkley Amendment

The construction industry health care requirement was introduced in recent weeks by Oregon senator Jeff Merkley, and has been dubbed the Merkley Amendment. In simplest terms, the amendment would require construction employers of all sectors of the industry with at least 5 employees and payroll of $250,000 to offer health insurance. Tom Owens of the Building and Construction Trades Department (BCTD) of the AFL-CIO says “offer” is the operative word when it comes ot the Markley Amendment. (The BCTD represents a number of construction trade unions.) “The amendment doesn’t require employers to pay for the insurance – it simply requires them to offer an insurance package if employees are interested,” Owens says. “Employees would be able to buy insurance whether or not the cost is shared with the employer.”

As a proponent organization of the Merkley Amendment, Owens says the BCTD views the provision as a way to address “cost shifting” in the health care industry.

“Cost shifting has been a major issue in the whole health care debate. People complain because you go to the hospital and end up paying $50 for a Tylenol, and that’s because of uncompensated care,” he says, explaining that the cost to hospitals to care for uninsured individuals ends up being spread around to everyone. “The construction industry in particular can be a dangerous industry with a high incidence of injury. By not covering employees, the costs for on-the-job injuries get shifted to other individuals, including employers who do the responsible thing by offering health insurance.”

Opponents’ Concerns

Despite proponents’ efforts to show the Merkley Amendment as a favorable item for the construction industry, many small-business owners remain concerned about the passage of the health care reform bill with or without this provision. “If this goes through, I can’t see how it wouldn’t be a devastating blow,” says Mark Scott, president of Mark IV Builders, Bethesda, MD. Scott notes that costs are rising for many aspects of his business, from permits which have more than doubled recently, to unemployment insurance which doubled last year and is set to triple again after January 1. According to language in the massive health care reform bill, Scott expects to pay two-thirds of employees’ insurance costs if the bill becomes law.

“This new amendment may not be the straw that breaks the camel’s back, but the more I hear, the more pessimistic I get,” Scott says. “I went a long time without knowing anyone that went bankrupt, but I expect that to change in the next month.”

While the measure apparently was intended to affect small homebuilders, companies in all aspects of the building trades, including remodelers and replacement contractors, are likely to be affected. Organizations around the construction industry, including NAHB and the National Lumber and Building Material Dealers Association are encouraging their memberships to protest the amendment as a vote on the final version of the Senate bill is expected Wednesday. If the bill passes, it will go into committee to be reconciled with the House version, which is expected to happen after the first of the year.