How Affordable Care Act impacts union health benefits
Union health and
welfare trusts press
to take part in
exchanges
Two year’s after the passage of Pa-
tient Protection and Affordable Care
Act (PPACA), unions are still coming
to terms with what the law means for
members.
Politically, the AFL-CIO is defend-
ing the law, touting its first-stage re-
sults, like the estimated 2.5 million
young adults who now have coverage
on their parents’ insurance, and the 54
million insured Americans who’ve re-
ceived preventive services at no cost.
But there are also worries on the hori-
zon — that the law may undermine in-
centives for employers to provide
health coverage, and give a competitive
advantage to nonunion employers.
Most union members obtain health
insurance through their employers.
Benefits are negotiated as part of their
collective bargaining agreements. In
some cases, large employers sponsor
the insurance by themselves. In other
cases, multiple employers band to-
gether in union-affiliated health and
welfare trusts, often referred to as Taft-
Hartley plans.
The larger self-insured plans — and
union employers like AT&T and Veri-
zon — benefited from PPACA’s tempo-
rary Early Retiree Reinsurance Pro-
gram. For retirees 55 or older who
weren’t yet eligible for Medicare, once
they incurred $15,000 in health care
claims in a plan year, the program reim-
bursed employers and trusts for 80 per-
cent of health care claims beyond that,
up to $90,000. The program began June
1, 2011, and was supposed to last two
years, but the $5 billion appropriation
was entirely committed by late fall
2011.
The Taft-Hartley union health and
welfare plans were otherwise largely
left out of PPACA.
Union health-and-welfare trusts
were providing health insurance
decades before the government insur-
ance programs Medicare and Medicaid
came along. Today, as many as 20 mil-
lion union workers, retirees, and de-
pendents get health insurance through
union-affiliated multi-employer trusts,
says Randy DeFrehn, executive direc-
tor of the National Coordinating Com-
mittee for Multiemployer Plans (NC-
CMP).
When the state health insurance ex-
changes start in 2014, small employers
will get tax credits for paying their em-
ployees’ premiums. But small employ-
ers that provide insurance through
union health and welfare trusts won’t be
able to get those tax credits. That’s be-
cause the tax credits are only for insur-
ance purchased on the exchanges. And
for insurance to be sold on the ex-
changes, it must be open to everyone.
The trusts don’t fit into that system be-
cause they’re neither insurers nor em-
ployers, strictly speaking; the trusts are
more like jointly-run purchasing pools
that self-insure or purchase group in-
surance plans.
“The way the exchange subsidy sys-
tem works, the employers who’ve been
doing the right thing for decades are
now going to be at a competitive disad-
vantage,” DeFrehn says.
DeFrehn’s group has been pushing
the Obama Administration to interpret
the law in such a way that the trusts
could take part in the exchange — so
that participating small employers could
also receive the tax credit. In August
2011, NCCMP submitted legal argu-
ments showing how the Health and Hu-
man Services Department could do that.
But DeFrehn said there’s been no
movement.
DeFrehn explains what’s at stake.
Union employers may pay upwards of
$1,200 a month per employee for fam-
ily health coverage. If they see that their
employees can get comparable cover-
age on the exchange for $400 a month,
because of the subsidies, then terminat-
ing the health and welfare trust — and
redirecting that $1,200 — will start to
make a lot of sense. That money could
be used to raise wages, shore up pen-
sion plans, or make the employer more
competitive.
Administration officials may be
skeptical that unions and union employ-
ers will terminate the plans, DeFrehn
said. “They think these plans mean too
much to the employees, and in fact, they
do. But when you’re talking about a dif-
ference of $5,000 per employee, it’s a
pretty clear economic decision.”
Without the ability to benefit from
the exchange, DeFrehn predicts many
health and welfare trusts will be termi-
nated, particularly in grocery, service,
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wise-uninsured individuals purchase
private health insurance or else pay a
tax penalty. The constitutionality of the
individual mandate is one of the ques-
tions the Supreme Court will rule on,
likely in the next two months.
But the 2,400-page law has many
other pieces. Some highlights:
INSURANCE REFORMS
• Insurers have to spend at least 80
percent of premium dollars on health
care. In other words, no more than 20
percent can be spent on administration,
advertising, CEO salaries, profits, and
so on. For group policies, the figure is
85 percent.
• Insurers can no longer drop people
from coverage when they get sick; nor
can they refuse to insure children under
20 years old because of pre-existing
conditions (or adults, starting in 2014);
nor can they impose annual or lifetime
claim limits.
• Insurers must allow children up to
age 26 to be included on their parents’
family coverage plans.
• All policies must pay for preven-
tive medical services, such as immu-
nizations, mammograms, and colono-
scopies, with no co-payments, co-
insurance, or deductibles.
MEDICAID EXPANSION
In 2014, Medicaid — the govern-
ment health insurance program for the
APRIL 6, 2012
NORTHWEST LABOR PRESS
and less-skilled construction trades,
where wages are low enough that em-
ployees will get substantial subsidy in
the exchanges.
In Portland, union leaders are al-
ready having that conversation. Cement
Masons Local 555 Business Manager
Brett Hinsley, a trustee on his union’s
health and welfare trust, says his em-
ployers pay $6.75 an hour for health in-
surance, and costs have been going up
10 percent a year.
“Here’s what we’re afraid of,” Hins-
ley explains. “If you don’t let us buy
into the exchange, our employers are
going to say our people could actually
get a better product if they go into the
exchange as individuals. It’s gotta be all
or nothing. If we’re going to have this
system, we ought to be able to partici-
pate in the exchange.”
poor — will expand to cover all those
earning up to 133 percent of the federal
poverty line. [That computes to about
$15,000 a year for an individual, or
$25,000 for a family of three.]
EMPLOYER INCENTIVES
AND PENALTIES
Small employers that provide health
insurance — particularly low-wage em-
ployers — get a tax credit reimbursing
them for up to one-third or half of what
they pay.
Large employers that don’t provide
health insurance, starting in 2014, will
pay an annual penalty of somewhat less
than $2,000 per employee.
INSURANCE EXCHANGE
Starting in 2014, individuals who
don’t otherwise have health insurance
will be required to buy it on state-based
insurance exchanges, or face a tax
penalty that starts at 1 percent of in-
come and rises to 2.5 percent by 2016.
Individuals will get access to subsi-
dies through the exchange, and those
earning up to four times the poverty
level will get some amount of subsidy.
The subsidies cap the premium as a per-
centage of income and also help with
co-pays and deductibles. For example, a
family of four with an income of
$66,000 would pay a maximum pre-
mium of 9.5 percent of their income —
$524 a month — and would get up to
$1,500 in help paying for co-pays and
deductibles.
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