April 16, 2010 Volume 111 Number 8

Health insurance reform: How will it affect union members?

On March 23, President Barack Obama signed into law the Patient Protection and Affordable Care Act. How will it affect union members? It’s complicated.

“The American Nurses Association (ANA) tried to boil this down, but everyone is having difficulty because it’s such a huge document, and there are so many bits and pieces to it,” said Barbara Crane, ANA board member and president of the five-state National Federation of Nurses.

The new law phases in, piece by piece, over eight years. Its key features are:

  • Reforms of abusive insurance industry practices;

  • Tax penalties on uninsured individuals and some employers that don’t offer health insurance; and

  • Ways to make it easier for individuals and small businesses to get insurance.

For those who have employer-provided health insurance coverage, the law tries to let them keep it. That includes most union members: 83.5 percent of union members have employer-provided health insurance, compared to 62 percent of non-union employees.

The insurance reforms in the new law mostly won’t affect union-negotiated health insurance plans. It will be illegal to deny insurance because of pre-existing conditions, but that’s a practice in the market for individual insurance policies, not group policies.

Some union health insurance plans do have annual and lifetime coverage limits, and those will be banned as of September 2010 (or whenever the current union agreement expires, if that is later.) Also in September 2010 (or after the current union agreement expires), union plans that cover dependent children will have to allow them to stay on until they turn 26. After 2014 (or the expiration of the current contract), the law will prohibit waiting periods of more than 90 days to get insurance coverage.

And starting Jan. 1, 2011, union plans, like others, would have to spend 80 or 85 percent of premium dollars on health care, and thus no more than 15 or 20 percent on administrative costs, marketing, and CEO salaries. Union health plans can voluntarily change the rules to comply with the law, or they can wait until the current contract expires to make the changes.

Union members will also benefit from the law when they themselves become unemployed and lose employer-paid health insurance, as many building trades union members do during longer periods of joblessness. Starting 2014, they could buy standardized individual insurance on newly-created state insurance “exchanges,” paying the same rate as everyone else in their age-group regardless of health status, and getting some amount of subsidy, depending on income.

JoAnn Volk, the national AFL-CIO’s foremost health policy expert, predicts that union members will also see some indirect benefit as millions more people become insured. Right now, there’s some amount of cost-shift when uninsured individuals aren’t able to pay the full cost of their care. In theory, those costs are passed on to paying customers, including the insured, and account for a portion of their premiums.

“I don’t think we’re going to start paying less for health care,” Volk said, “but the cost increases that have been eating up wage increases will get less severe.”

Union members may also see indirect benefits from the new employer incentives and mandates. Starting in 2014, small employers of under 25 employees will get a temporary tax credit for offering health insurance and be allowed to buy it on newly-created state-by-state small business health insurance exchanges. Also in 2014, large employers (more than 50 employees) that don’t offer insurance, and whose employees receive a government subsidy to buy insurance on the exchange, will pay a $2,000 a year penalty. Unions have argued that responsible employers provide health benefits, and complained that those responsible employers face unfair competition from employers that don’t provide benefits. So the employer penalty could narrow the competitive advantage “low-road” employers get by not providing health insurance.

“It was a disappointment that [the employer mandate] didn’t cover smaller firms,” Volk said. “But at least, for the first time ever, there’s some official recognition that employers have to pay.”

The new law also contains a provision unions fought energetically: a 40 percent excise tax on high-cost health plans. Starting 2018, the most expensive union health plans could be affected by the tax, which would be levied on the portion of the premium in excess of $27,500 for family coverage or $10,200 for individual coverage, ($30,950 and $11,850 for retirees and workers in high risk professions.) The intent is not that the tax would actually be collected. Any employer faced with throwing away 40 cents on the dollar would take whatever measures needed to lower premiums. Trouble is, they would do that by lowering benefits and increasing the share workers pay.

The tax wouldn’t raise money directly. Instead, it would have the effect of a cap on employer health insurance contributions, which are made with before-tax dollars. That would in theory steer more money into wages or profits, both of which are taxed.

In a previous version of the bill, passed by the Senate, the tax took effect earlier and at a lower threshold. Union protests persuaded Congressional leaders to make changes, and the lost revenue was replaced with two tax measures that affect high-income taxpayers: Starting 2014, the 3.8 percent Medicaid payroll tax will be levied on wage income over $200,000, and on “unearned” investment income as well.

At one point in the bill’s Congressional odyssey, U.S. Senator Jeff Merkley (D-Ore.) passed an amendment that imposed a similar employer mandate on smaller employers in construction, but it was removed in the final version.

“It was a valuable effort to balance the playing field in the construction industry,” Merkley told the Labor Press. But the decision to dump it was made at the highest levels of leadership, Merkley said, including the president.

Even for a health care policy expert like Volk, it’s very hard to predict what will happen as various pieces of Patient Protection and Affordable Care Act take effect. It’s a complicated series of federal government interventions into an already extremely complex health care “market.”

Will small employers tend more to start offering health insurance while they get a subsidy for doing so, or will they drop health insurance when their employees get more options as individuals. Will individuals be more likely to buy insurance, with whatever subsidies they’re eligible for, or pay the tax penalty because they still can’t afford it? And what will be the law’s effect on overall health care costs?

Crane, the nurse union leader, was invited to the White House March 3, and stood behind President Obama wearing a white lab coat while he delivered an eleventh hour speech on the bill. Crane likes many parts of the Patient Protection and Affordable Care Act, but said it remains to be seen how well it will work.

“We’re hoping we’re going to see these [predicted] 35 million people get access to care,” Crane said.

In the end, said the AFL- CIO’s Volk, organized labor determined that the bill was worth supporting.

“We wanted to see health reform,” Volk told the Labor Press. “We really didn’t think that the status quo was something we could continue to try to work through at the bargaining table."


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