Jan. 7, 2011:NWLP
1/4/11
9:59 AM
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New health care law starts to affect union health trusts
Members’ children can
stay covered ‘til age 26,
and health plans end
lifetime coverage limits
By DON McINTOSH
Associate Editor
The Patient Protection and Afford-
able Health Care Act, signed into law
March 23, 2010, by President Barack
Obama, is starting to affect health in-
surance plans that union members and
their families are enrolled in.
So far, the two biggest changes are
that children will be able to stay on
their parents’ health plans until they
turn 26; and that plans won’t be al-
lowed to impose lifetime dollar limits
on claims for essential services. Those
changes must take effect whenever a
union health trust’s “plan year” begins
—and no later than Sept. 23, 2011. [For
example, members of United Food and
Commercial Workers Local 555 work-
ing for Portland-area grocery employ-
ers have a union-negotiated health plan
whose plan year begins Jan. 1, so the
changes took effect then for those
members.]
If an employer-paid health plan pre-
viously covered employees’ children,
those children will now be able to stay
enrolled until their 26th birthday —
even if they’re not living with their par-
ents, are not in school, are not claimed
as dependents on a tax return, and even
if they are married. However, until
2013, health plans may refuse to cover
children who can get health coverage
through their own employer or a
spouse’s employer.
Gene Mechanic, a Portland attorney
who is advising union health trusts
about the new law, says both require-
ments will cost money. Plan adminis-
trators are estimating that covering kids
through age 26 will increase overall
costs 2 to 5 percent, and eliminating
lifetime coverage limits will increase
costs 0.5 to 1 percent.
The new legislation also phases out
annual coverage limits over the next
three years, but plans can request a
waiver of that requirement; 222 plans
had received waivers as of Dec. 3, Me-
chanic said.
Typically, union-affiliated health
trusts are funded by an employer con-
tribution that is negotiated as part of a
collective bargaining agreement. So the
additional expenses brought on by the
new requirements could lead health
plan trustees to impose a surcharge on
employers, or they could dip into re-
serve funds to cover the added costs.
One thing trustees probably won’t do
to make up for the extra expense is sub-
stantially reduce members’ health ben-
efits. That’s because if trusts do reduce
benefits, they would lose their status as
“grandfathered” health plans. A grand-
fathered health plan is basically any
employer-paid health plan that existed
before the new law passed and that pro-
vides a certain minimum level of cov-
erage.
Grandfathered health plans aren’t
subject to some other new insurance re-
quirements, such as: that preventive
care be provided without any co-pay or
deductible; that out-of-network emer-
gency care be charged at the same rate
as in-network; and that patients have
direct access to obstetric and gynecol-
ogical care without referral from a pri-
mary care physician.
Union members may have heard
about several other insurance regula-
tions that are part of the new law, but
those don’t tend to affect union health
plans directly. For example, if insur-
ance companies sell individual policies
that cover children, they may no longer
exclude or deny coverage based on pre-
existing conditions. And insurance
companies can no longer drop patients
after they get sick, a practice known as
rescission.
One other change may affect some
union health trusts, though probably
not in Oregon: As of Jan. 1, at least 85
percent of the premiums collected for
large-group insurance policies have to
be spent actually paying health care
claims; in other words, insurance profit
and administrative expenses can’t be
more than 15 percent. That could result
in rebates to union health trusts that
purchase group health policies in states
where administrative costs have been
over 15 percent.
“Union health plans are living with
these changes, and figuring out ways to
lessen the cost as much as possible,”
Mechanic said. “What they’re more
concerned about is what’s going to
happen down the road.”
So far, the changes are small and
technical; the bigger, more noticeable
changes will all take place three years
from now — if the law hasn’t been
overturned by the Supreme Court or re-
pealed by Congress. Starting Jan. 1,
2014, everyone with earnings below
the poverty level will be eligible for
Medicaid. The uninsured will be re-
quired to buy health insurance through
newly-established state exchanges, or
else pay a tax penalty. Households up
to four times the poverty line will get
some amount of subsidy to purchase
the insurance. Small employers will
also be able to buy insurance in ex-
changes. Large employers will pay a
penalty if they don’t provide insurance.
Many of the precise details will be
worked out by state governments and
federal agencies in the next year or two.
That means a lot of unanswered
questions about how the new law will
affect a complicated health care mar-
ket. For example, will employers that
currently provide health coverage be
more likely to drop it once their em-
ployees can get affordable, govern-
ment-subsidized insurance through the
state exchanges? Large employers that
don’t provide health insurance will pay
less than $2,000 a year penalty; how
much will that incentivize them to pro-
vide it when employee-only insurance
premiums can easily top $6,000 a year?
If more people are insured, and insur-
ance is more standardized, will health
insurance premiums decrease?
“I believe that if the law is really im-
plemented the way it was intended to
be, it could provide more affordable
quality health care across the board,”
Mechanic said. But he added it’s going
to require a lot of work to make sure
the reform accomplishes this goal, and
unions need to be in the room, and at
the table.
For union health plans, the law im-
poses short-term costs, but also pro-
vides long-term opportunities, Me-
chanic says. For example, if unions are
involved when states set up the ex-
changes, the exchanges could operate
in ways that level the playing field for
union employers. States are required to
set up exchanges for individuals and
small employers, but they could set
them up for large employers (including
union employers) as well.
Unions could negotiate contracts in
which, instead of employers providing
health care, employers could pay part
or all of the premium for insurance
bought though the exchange. It’s even
conceivable that union health plans, in-
dividually or in groups, could open
themselves up to all comers, maybe be-
coming cooperative health insurers that
sell insurance to individuals or em-
ployers on the exchanges. Unions
could play a role as “navigators” help-
ing individuals or employers choose
among insurance plans offered on the
exchanges.
“All unions need to realize that the
act is going to greatly impact them,”
Mechanic said, “and they need to start
thinking about how they’ll be impacted
and what they can do as the law is be-
ing developed.”
University of Oregon’s Labor Edu-
cation and Research Center (LERC)
will address these issues in a Feb. 17-
18 training on health care bargaining,
to take place in Portland.
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JANUARY 7, 2011