Uh-O! Obamacare Poses Challenges To Collective Bargaining
October 9, 2012
By Joe Maniscalco
The Affordable Care Act signed into law in 2010 is expected to extend vital health insurance to tens of millions of Americans who desperately need it. But the law’s impact on the bargaining table over the next four years is shaping up to be a lot more complicated than that.
According to Labor Campaign for Single-Payer Coordinator Mark Dudzic, the collective bargaining environment will soon have to contend with four separate challenges that, if not surmounted, appear destined to undermine the entire plan’s effectiveness.
“The first is what I call race to the bottom pressures,” Dudzic said. “The ACA has four tiers of benefits from a platinum plan down to a bronze plan. Most unions plans are actually above the platinum level. And I think the pressure will be to push people down that ladder into these lower actuarial plans.”
Dudzic estimates that if a 70 percent silver plan becomes the standard, labor negotiators will find themselves in a very vulnerable position at the bargaining table.
“Particularly with unions that negotiate with large national corporations and with public employees who will be attacked by the austerity forces for holding plans that are greater than what other people have,” Dudzic said.
Newly created state exchanges – ostensibly designed to be places where the uninsured can shop around for the most affordable health care plans – are also expected to be problematic.
“There’s going to be a lot pressure for employers, particularly low-wage employers to dump private insurance all together and push their workers onto these state exchanges,” Dudzic said. “Some of them will receive subsidized benefits. In a lot of places it will be very disruptive.”
Then there’s the stress the Affordable Care Act’s could have on union-sponsored benefit funds themselves.
“A lot of them may not be able to survive,” Dudzic said. “I think it’s going to really shake up the Taft-Hartley world – and that’s a real negative in my mind because the gold standard for healthcare among working people are the benefits that they get under the union-sponsored plans.”
If that wasn’t enough for fund managers and trustees to worry about, there’s also new levies looming in the form of a “Cadillac tax” slated to be implemented in 2018.
“It’s beginning to look a lot more like a Chevy tax because healthcare inflation is continuing to run pretty high,” Dudzic said. “Because of this, more and more workers’ healthcare plans will be subject to this tax. And that’s also going to cause all kinds of pressures at the bargaining table. We saw it with the Verizon contract that was just negotiated. The company maintained that if they didn’t start cutting benefits then the workers there would be subject to this “Cadillac Tax” in 2018. We’re going to see that play out extensively.”
National Health Practice Leader Ed Kaplan has over 25 years experience working with managed care plans, and like Dudzic, he also sees important reasons why organized labor should be concerned about some of the tenants inherent in “Obamacare.”
“The fundamental thing that people have to realize is that the Democrats’ primary goal with the Affordable Care Act was to get everybody in coverage,” Kaplan said. “But what kind of coverage was really a different story.”
Presently, Taft-Hartly group plans don’t age-rate. So, everybody gets the same rate whether they happen to be a 25-yer-old just starting out, or a 59-year-old single mother with growing children. But that’s not the way the new state health exchanges will operate. Under the new guidelines, insurance companies operating within each state exchange will be allowed to charge older members three times as much as younger people.
“There’s going to be lots of winners and losers,” Kaplan said. “The 59-year-old single mom is gong to pay more because the individual exchanges can age-rate. The young union worker will be fine. There will be plenty of money in the system for them to get decent coverage. But the 59-year-old single mom may find that it isn’t enough in the public exchange even with a subsidy.”
Critics also question the readiness of coming state exchanges, and whether or not they will be especially attuned to the needs of members. But most alarming is the fear that state exchanges could threaten the viability of existing health and welfare funds should employers decide that paying a $2,000 per worker penalty would be cheaper than continuing coverage.
Under the Affordable Care Act, low-wage workers earning too much to qualify for Medicaid, will be eligible for federal subsidies enabling them to purchase health coverage through the state exchanges beginning in 2014. But there could be unintended consequences to this.
“These federal subsidies are so big for some workers that they dwarf the actual employer penalties that employers would pay,” Kaplan said. “There’s a possibility that employers that now contribute to a health and welfare fund on behalf of union workers can say in the next round of bargaining, ‘Hey, you know what? We no longer want to provide health care coverage to the workers.’ Then what happens to these health and welfare funds? Do they start to segment?
Dudzic calls the Affordable Care Act “a mass of contradictions” that on the one hand expands coverage to the working poor and establishes new regulations that prevent insurance companies from cutting off benefits when people need them the most.
“These are definitely positive things,” Dudzic said. “But in terms of how it’s going to impact collective bargaining, I don’t think it’s going to stop the crisis that we’ve had at the bargaining table trying to bargain for our healthcare benefits. It’s still based on a system of private, for-profit insurance.”
In response to the Affordable Care Act, Kaplan’s group has created a model that unions can now use to try and understand how they might fare under “Obamacare” – and whether or not they need to change the way that they approach the bargaining table.
“We’re telling our clients that we’ve got to wait and see,” Kaplan said. “We don’t want you to rush to the door of these public exchanges because there’s going to be some hiccups. Most want to keep their group health plans.”
In any event, unions and their health and welfare funds will have contend with employers in the “non-bargaining” world like mega-corporation Walmart who are expected to “dump” as many of their employees as possible into the public exchanges in an effort to further cut costs.
“We have to recognize that can affect both the cost of labor and your relative competitiveness,” Kaplan said.
Low-wage workers still appear to be the group that the Affordable Care Act will most directly affect once it kicks in.
“We expect the biggest change in many ways will be in groups that we are organizing,” Local 32BJ Director of Collective Bargaining Manny Pastreich said. “These are lower-paid service workers who typically do not have access to affordable health insurance or quality health insurance through their employers.”
In addition to challenges to collective bargaining, Dudzig also fears that in the next couple of years the Affordable Care Act will set off a “time bomb” involving efforts to privatize the administration of the law – resulting in the loss of as many as 100,000 private sector jobs.
“There is a quiet battle going on in D.C. over the regulations writing to the Affordable Healthcare Act,” Dudzic said. “There’s some concern that the regulations will allow, not only the new services under the Affordable Healthcare Act, but even things like Medicaid to be privatized by the states.”
According to critics, success of the Affordable Care Act hinges on the highly suspect assumption that if health care costs are driven down, employers will pay workers more, which, in turn, will increase the tax-base for the Federal Government.
Kaplan said he’ll believe that when he sees it.
“Now, I think employers might give workers a bonus,” Kaplan said. “Or a little bit of wages. But I don’t know if they’re going to say, ‘All right, we saved five-grand in healthcare coverage, we’re going to give you five-grand in salary or new wages.'”