Harrah’s execs eat more health care costs

Keith Snider

Tuesday, April 6, 2004 | 10:49 a.m.

Harrah's Entertainment Inc. is cutting costs and making health care more affordable for low-wage workers partly by shifting the burden onto employees at the top of the pay scale.

Workers who make $90,000 or more pay twice as much for health care, on average, as those who make less than $30,000, said Gary Thompson, spokesman for the Las Vegas-based company.

Harrah's cut health-care costs to $118 million last year from $123 million in 2002, at a time when health-insurance premiums rose 14 percent in the United States, according to the Henry J. Kaiser Family Foundation. Much of the savings came at the expense of the company's best-paid workers.

"There was a lot of consternation around here," Thompson said. "There were also people who said, 'Hey, people raising a family of four on $30,000 a year can't afford medical care.' "

Chief Executive Gary Loveman started squeezing health-care costs in 2001 when spending blew through Harrah's budgets and cut 19 cents a year from earnings. Monthly costs grew to $475 per employee that year from $334 in 2000.

Loveman raised fees for medical care, forced employees to pay a higher share of premiums and cut subsidies for families. Last year the company spent about $414 a month for each employee's health care.

"We did it on the backs of our employees," Loveman said in a Washington speech last month before the National Business Group on Health.

Once Loveman got costs under control, he shifted money into health-care spending by cutting the company's 401k match. That hit mostly high-paid employees who could afford to contribute to the retirement plan, he said. Harrah's also charges low-wage workers half as much in premiums, Thompson said.

"These are low-wage workers," Loveman said in the speech. "When you go to casinos and hand out bonuses, you hear, 'I'm going to pay my back utility bill' or 'I'm going to fix the flat tire on my truck.' "

Harrah's drug costs fell 25 percent last year and big medical claims, which were $11 million in 2001, dropped by 26 percent.

Workers this year began paying $25 co-payments for doctor visits for the company's standard health plan and a $15 co-pay for the more deluxe plan, Thompson said. Last year, doctor visits cost a flat $20.

"We found people were going to the emergency room for a cold," he said. "We said, 'You know what. You can still do that, but you're going to pay a bigger share of the cost.' We're trying to get the attention of employees."