As Obamacare insurance exchanges near launch, labor braces for impact
By DON McINTOSH, Associate Editor
Organized labor — entirely left out of the legislation that became known as Obamacare — has spent years behind the scenes patiently pleading with the Obama Administration to be allowed to benefit from the law’s implementation. Now, four months before the law’s mandated state insurance exchanges launch, it appears that while some union members will benefit, many others may actually be harmed.
The state-by-state health insurance exchanges, which launch Oct. 1, 2013, are the linchpin of Obamacare’s plan to cover the uninsured. The exchanges will benefit a minority of low-wage union members who don’t currently have employer-provided health insurance. But they may harm many other union members who are covered through union-affiliated multi-employer health trusts — which are prevalent in construction and in low-wage industries like grocery and janitorial.
The harm would come chiefly because union members and their employers won’t have access to individual subsidies, or to small-employer tax credits, for insurance purchased on the exchanges. But their nonunion competitors will.
How unions are shut out of the state insurance exchanges
The state exchanges will begin selling insurance Oct. 1 to individuals and small businesses, with coverage to take effect Jan. 1, 2014.
“We want a level playing field, and we want to get rid of this incentive that’s driving companies to drop coverage.” — United Food and Commercial Workers spokesperson Tim Schlittner
All otherwise uninsured individuals will be required to purchase health insurance, or else face a tax penalty that starts at 1 percent of income and rises to 2.5 percent by 2016. Those earning up to four times the poverty level will get some amount of subsidy when they purchase on the exchanges. And the poorest — those earning less than 133 percent of the poverty level — will have their insurance paid for entirely.
But individuals won’t be allowed to buy insurance on the exchanges if their employer provides health insurance. And most union employers do provide health insurance. Unionized janitorial and security contractors in Portland, for example, recently signed five-year contracts committing them to provide insurance. Nonunion employers that currently provide insurance could decide to drop coverage, and give raises to cover their workers’ individual premiums for insurance bought on the exchanges. But union employers wouldn’t have that option while their current contracts continued.
Meanwhile, small businesses (less than 50 employees) don’t have to provide insurance under the new law. But they get a tax credit reimbursing them 50 percent of the cost if they purchase insurance on the exchanges for their employees.
Yet unionized small businesses that purchase insurance through union health trusts won’t get that tax credit. The tax credit only goes for insurance that’s sold on the exchanges. And the trusts can’t sell on the exchanges. The trusts are neither insurers nor employers, strictly speaking; they’re more like jointly-run purchasing pools that self-insure or purchase group insurance plans.
Union trusts forced to subsidize insurance companies, while employers face pressure to cut hours, benefits
That’s not all. Union health trusts will actually have to pay a temporary tax to subsidize private insurance companies selling individual coverage on the exchanges. In the exchanges, insurance companies have to take all comers, and are barred from denying coverage based on “pre-existing conditions.” To compensate them for any losses that might cause, the government is creating a “reinsurance” pool, funded by $20 billion in taxes that will be levied on all group health plans over a three-year period. The tax will be $63 per covered individual for the first year, and four-fifths of that amount will go to pay for the reinsurance program.
Lastly, large businesses (more than 50 employees) that don’t provide insurance will face a tax penalty of a little under $2,000 a year per full-time worker. But they face no penalty for not providing insurance to part-time workers. That gives large employers a powerful incentive to reduce hours to less than 30 a week — particularly if their employees are low-wage, and thus would qualify for subsidized coverage on the exchange.
But again, that won’t be the case with large unionized employers — if they’re locked into multi-year collective bargaining agreements under which they provide health benefits to part-time workers.
United Food and Commercial Workers spokesperson Tim Schlittner said those union employers are going to feel increased competitive pressure to drop coverage for part-timers. If that happens, those workers will be able to get coverage on the exchanges, but benefits won’t be nearly as good.
“Now, that will obviously be subject to the negotiations at the bargaining table,” Schlittner said, “and we’re going to work to ensure we get the best health care possible for our members. But we want a level playing field, and we want to get rid of this incentive that’s driving companies to drop coverage.”
For some union employers, there’s more to come. Starting in 2018, the government will levy a 40 percent excise tax on so-called “Cadillac” health plans: Any employer or health insurer that offers a plan that costs more than $10,200 a year for an individual or $27,500 for a family would pay the tax on any amount exceeding that threshold. The expectation is not that the tax would actually be collected. Rather, any employer faced with throwing away 40 cents on the dollar would take whatever measures needed to lower premiums. They would do that by lowering benefits.
Done with private pleading
With labor locked out of Obamacare’s benefits, and forced to pay its costs, some labor leaders are getting vocal.
On April 24, Roofers Union President Kinsey Robinson called for repeal, or complete reform, of the law. Concerns expressed by his union about certain provisions of the ACA have been totally ignored, Robinson said in a press statement: “These provisions jeopardize our multi-employer health plans, have the potential to cause a loss of work for our members, create an unfair bidding advantage for those contractors who do not provide health coverage to their workers, and in the worst case, may cause our members and their families to lose the benefits they currently enjoy as participants in multi-employer health plans.”
Premiums for family coverage provided by union health trusts averages about $16,000 a year, said Randy DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans (NCCMP) — a trade association for the union trusts. That works out to over $7 an hour for a full-time employee, DeFrehn said, and it’s a labor cost that has to be covered when an employer contributing to these plans is head to head in a competitive bidding situation.
President Obama’s promise to labor — if you like the health plan you’ve got now, you can keep it — “is simply not true for millions of workers,” said UFCW President Joseph Hansen, who’s also chair of the Change to Win labor federation, in a May 20 op-ed in The Hill newspaper.
“All we want is equality — where our plans are treated the same as for-profit insurers,” Hansen wrote. “We’d be open to a legislative fix, but ultimately this is the administration’s responsibility. They are leading the regulatory process. It’s their signature law.”
As many as 20 million people — union workers, retirees and dependents — get health insurance through union-affiliated multi-employer trusts, says NCCMP’s DeFrehn. For two years, DeFrehn’s group pushed the Obama administration to interpret the law in such a way that the union health trusts could be deemed “qualified health plans” in the exchange — so that participating small employers could receive the tax credit. But DeFrehn told the Labor Press his group has given up on that approach, having gotten nowhere.
Instead, NCCMP is now readying a proposal to let union health plans redefine eligibility — dropping lower-income individuals from coverage — so that they would be eligible for the subsidized coverage on the exchange. Employers could still contribute to pay for the employee share of the premium purchased on the exchange, just not through the trust. DeFrehn said that proposal is still under consideration, but time is running out.
The exchanges open in just over 100 days.