WASHINGTON — Early versions of the Senate’s far-reaching health care bill said that small businesses with fewer than 50 workers would not be penalized if they failed to provide insurance. That was before labor unions in the construction industry went to work and persuaded Senate leaders to insert five paragraphs.
Their provision, added to the 2,074-page bill at the last minute, singles out the construction industry for special treatment, in a way that benefits union members and contractors who use union labor.
In this one industry, the exemption from the penalty would be much more limited, available only to employers with fewer than five employees. Construction companies with five or more workers would generally have to provide health insurance or pay a penalty — an excise tax of $750 per employee.
Senator Lisa Murkowski, Republican of Alaska, asked: “Why this assault on the home builders? I don’t get it.”
Labor unions that have negotiated health benefits for construction workers lobbied for the provision. Without it, they said, small nonunion employers would have an unfair competitive advantage over companies that they say do “the right thing” by providing health benefits to plumbers, electricians, carpenters, roofers and other workers in the building trades.
The provision was one of many added to the bill as senators rushed to finish the legislation by Christmas Eve. It illustrates the difficulty of establishing uniform national requirements in a country where employers have, over decades, devised myriad different arrangements for providing health insurance to employees.
The construction industry provision is receiving a second look as work begins in earnest this week to resolve differences in bills passed by the Senate and the House to remake the nation’s health care system. Other provisions sure to be scrutinized include a tax break for the Blue Cross and Blue Shield plan in Nebraska; Medicare coverage for residents of Libby, Mont., sickened by a mineral mine; extra Medicaid money for Massachusetts, Nebraska and Vermont; and a special dispensation for a handful of doctor-owned hospitals.
White House officials have generally acquiesced in the provisions, which they see as a normal part of the legislative process, required to secure votes for a bill overwhelmingly opposed by Republicans.
Republicans complained of “sweetheart deals,” payoffs and kickbacks. But the Senate majority leader, Harry Reid, Democrat of Nevada, brushed aside the criticism.
“There’s a hundred senators here, and I don’t know if there is a senator that doesn’t have something in this bill that was important to them,” Mr. Reid said. “If they don’t have something in it important to them, then it doesn’t speak well of them. That’s what this legislation is all about. It’s the art of compromise.”
Health insurance for all Americans is the overarching goal of the Senate and House bills.
Employers would be subject to financial penalties if they do not provide workers with health insurance that meets federal standards. Under the Senate bill, businesses with fewer than 50 employees would be exempt from the penalties in every industry but construction.
Senator Jeff Merkley, Democrat of Oregon, proposed the special rule for the construction industry. Mr. Reid accepted it when he was assembling the final bill.
Daniel V. Gardner, a lobbyist at the International Brotherhood of Electrical Workers, said: “The Merkley amendment is necessary because construction is an extremely competitive, low-bid industry. Very few small nonunion construction employers provide health insurance. It’s one way they gain an advantage over union contractors.”
At union contractors, Mr. Gardner said, health benefits account for 12.5 percent to 20 percent of payroll. The Senate and House bills would significantly increase these costs, he said, by banning most annual and lifetime limits on coverage and by requiring insurers to allow children to stay on their parents’ policies through age 25 or 26.
“Together,” Mr. Gardner said, “these requirements will drive up costs an additional $1,000 per member every year.” While small union contractors would be required to pay the costs, he said, nonunion contractors of similar size could avoid the expense.
Labor unions tried unsuccessfully to get a similar provision inserted into the House bill.
Senator Merkley said, “Construction contractors are overwhelmingly small businesses,” with 90 percent of them employing fewer than 20 workers. If companies with fewer than 50 workers received an exemption, he said, that “would effectively exempt the entire construction industry.”
Lake A. Coulson, executive director for government affairs at the National Electrical Contractors Association, which represents many union contractors that already provide health benefits, shares that concern and lobbied for the Merkley amendment.
But in a letter to Congress, other business trade associations, including the National Association of Home Builders and the United States Chamber of Commerce, expressed dismay. The construction industry provision looks like “a political payoff to satisfy the desires of a small constituency,” the letter said.
Joe Robson, chairman of the home builders group, said the requirement would “kill jobs at thousands of small builder firms” struggling to stay afloat in the worst housing downturn since the Depression.
The Bureau of Labor Statistics said the unemployment rate in the construction industry was 19.4 percent in November, nearly twice the national rate.
Under the Senate bill, if an employer with at least five employees does not offer coverage and has at least one full-time employee who receives federal subsidies to buy insurance, the company would have to pay the penalty of $750 a year for each of its full-time employees, regardless of how many got subsidies.
The biggest source of revenue in the Senate bill is a tax that would be imposed on high-cost insurance policies, the so-called Cadillac plans. Construction worker unions oppose the tax because they believe their health plans could be affected by it.
Under a separate provision of the Senate and House bills, the government would provide tax credits to help small businesses buy health insurance for two years. But the National Federation of Independent Business, a trade group, said that many small businesses would still find insurance difficult to afford.