What’s Behind The Big Union Attack On Obamacare?

July 22, 2013 4:53 a.m.

You know things have gone weird in the runup to Obamacare’s big rollout when Republicans are quoting big-name union leaders to make the case for scrapping the whole law.

But it turns out this alliance of convenience is bound by two interwoven acts of self-interest: the GOP’s unwillingness to fix one flawed piece of the law; and certain unions’ efforts to create a special carveout for their members — to offset potential disruptions Obamacare might create for workers and unions — at a politically vulnerable moment for the ACA.

Ironically, when Republicans side with labor against Obamacare, they’re unintentionally and obliquely endorsing efforts to secure tax subsidization for unions.

In a recent letter to the two top Democrats on Capitol Hill, the leaders of the Teamsters, United Food and Commercial Workers, and Unite Here wrote grimly about Obamacare, whose key benefits kick in five short months from now.

“[U]nless you and the Obama Administration enact an equitable fix, the ACA will shatter not only our hard-earned health benefits, but destroy the foundation of the 40 hour work week that is the backbone of the American middle class,” the letter reads.

They raise three concerns in their letter. The first is well known.

“[T]he law creates an incentive for employers to keep employees’ work hours below 30 hours a week,” the letter explains. “Numerous employers have begun to cut workers’ hours to avoid this obligation, and many of them are doing so openly. The impact is two-fold: fewer hours means less pay while also losing our current health benefits.”

This is a real issue, and was a big part of the reason the Obama administration has delayed implementation of the law’s employer mandate for one year. Ideally, Congress would simply tweak the offending provision, but the GOP has committed to never tinkering with the law to make it better, and so the provision in question does threaten worker compensation and benefits.

Until the GOP moves off its position, there’s nothing Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi can do to fix it.

But that complaint serves as window dressing for the nex two items on the list, which are at the core of their concerns.

Instead of teaming up with big private insurers, some employers and unions have for years jointly run their own, non-profit group plans. These so-called Taft-Hartley plans function for many purposes like regular employer-sponsored insurance, and are treated as such in the tax code: employer contributions to premiums are tax deductible, and employee contributions are pre-tax. Nevertheless, unions are beseeching Democrats to reinterpret or change the law so that these particular beneficiaries also benefit from new tax credits intended to subsidize individuals who will be purchasing their own insurance in the exchanges. A double subsidy.

“Under the ACA as interpreted by the Administration, our employees will [be] treated differently and not be eligible for subsidies afforded other citizens,” the letter reads. “As such, many employees will be relegated to second-class status and shut out of the help the law offers to for-profit insurance plans.”

The comparison is apples to oranges. The ACA is quite clear that workers with access to tax-preferred, affordable group coverage won’t be eligible for new subsidies that will be provided to uninsured people on the exchanges.

“If you’re eligible for a Taft-Hartley plan you’re treated as if you have employer health care, and you can’t get a premium tax credit,” explains Timothy Jost, an ACA expert at Washington and Lee University law school. “They’re not happy about that, because they want premium tax credits.”

But that would be double dipping. The ACA was designed to dissuade managers of group plans from dumping their workers on to the exchanges. It thus largely preserves existing tax subsidies for those who provide and receive group insurance — including Taft-Hartley plans. It separately establishes new pooled markets for individuals, and creates a new tax subsidy so that middle class people in those markets can afford to purchase insurance. Nobody in the exchanges gets to exclude their premium contribution from their income taxes; and nobody in a group plan gets to supplement their tax exclusion with a new exchange subsidy.

The authors of the letter want workers in Taft-Hartley plans to get both benefits.

For unions, the idea is a solution to a largely unrelated problem. They’re concerned that the ACA will entice employers — particularly small employers with unionized, low-income workers — to abandon the Taft-Hartley funds they contribute to, and place their workers into state-based exchanges instead causing the funds themselves to disintegrate.

If the funds disintegrate, some workers will get a good deal in the exchanges, while others — temporary workers with sporadic pay, for instance — grapple with temporary hardships, if their subsidies don’t fully cover the cost of their insurance. (In a February 2012 article for Benefits Magazine [PDF], employee benefit lawyers at the firm Seyfarth Shaw concluded there are “compelling reasons why bargaining parties may choose to continue to maintain multiemployer plans even if they cannot operate within the exchanges.”)

The solution unions are seeking, though, would effectively amount to taxpayer subsidization of unions and their employer partners at unknown cost. And it wasn’t part of the final version of the ACA, or publicly debated during the legislative process.

“Who knows what was discussed with whom when the law passed, but there was nothing on the face of the statute suggesting anyone other than people who aren’t offered affordable group coverage will be eligible for premium tax credits,” explains Gary Claxton, vice president at the Kaiser Family Foundation and director of the Health Care Marketplace Project. “I don’t see how when reading that how anybody with Taft-Hartley would be eligible for tax credits. I don’t see the legal argument. Maybe there’s some memo or some legal interpretation. Maybe they thought that there was a provision that they wanted in there that didn’t make it in. But it’s difficult to see.”

“What the unions are saying is ‘We have a problem here, can you help us fix it,'” explains Jared Bernstein, a liberal economist at the Center on Budget and Policy Priorities who served as Vice President Joe Biden’s chief economist. “They’re saying ‘can you help us here, can you bend the rules,’ and it’s a tough ask for the government.”

“There are lots of exceptions under this law,” Jost added. “[This issue] bubbled up to the surface pretty quickly [after it passed] and my response was where were you guys when this was being put together.”

Officials for the Teamsters and Unite Here would not comment on the record for this article. However, union officials have explained their grievances in multiple venues over the past several months.

Many UFCW members have what are known as multi-employer or Taft-Hartley plans. According to the administration’s analysis of the Affordable Care Act, the law does not provide tax subsidies for the roughly 20 million people covered by the plans. Union officials argue that interpretation could force their members to change their insurance and accept more expensive and perhaps worse coverage in the state-run exchanges.

[UFCW President Joe] Hansen, who is also the head of the Change to Win labor federation, told The Hill that his members often negotiate with their employers to receive better healthcare services instead of higher wages. Those bargaining gains could be wiped away because some employers won’t have the incentive to keep their workers’ multi-employer plans without tax subsidies.

“You can’t have the same quality healthcare that you had before, despite what the president said,” Hansen said. “Now what’s going to happen is everybody is going to have to go to private for-profit insurance companies. We just don’t think that’s right. … We just want to keep what we already have and what we bought at tremendous cost.”

On a related note, the unions’ letter takes issue with the fact that under the ACA, Taft-Hartley plans, like all plans, will contribute to a reinsurance fund that will backstop insurers on state exchanges, in the event that there’s a transition period during which a disproportionately sick and elderly population enrolls for benefits.

“If the claims are above a certain amount, you will get reinsurance to help cover your cost,” Jost explains.

But all group plans will contribute to this pool, not just Taft-Hartley plans. And yet the letter suggests unions would like a special exemption from that fee as well.

“[E]ven though non-profit plans like ours won’t receive the same subsidies as for-profit plans, they’ll be taxed to pay for those subsidies,” the letter reads.

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