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The Unions vs. Obamacare

Disenchantment sets in.

Mar 25, 2013, Vol. 18, No. 27 • By MARK HEMINGWAY
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"I heard [Obama] say, ‘If you like your health plan, you can keep it,’ ” John Wilhelm, chairman of Unite Here Health, representing 260,000 union workers, recently told the Wall Street Journal. “If I’m wrong, and the president does not intend to keep his word, I would have severe second thoughts about the law.” Besides Wilhelm, some of the nation’s largest union bosses have taken to publicly criticizing the Affordable Care Act.

Is this where the unions will end up?

Is this where the unions will end up?


Of course, keeping your health care plan, like many Obama-care promises, has turned out to be demonstrably untrue. According to the Congressional Budget Office, about 7 million Americans stand to lose insurance coverage through the law by 2022. But unlike most private-sector workers expected to lose their current health coverage, union workers were a powerful Democratic constituency granted specific exemptions from Obama-care. Labor leaders are just now realizing that those protections are fleeting, and Obama-care regulations and cost increases will fall on the politically connected and unconnected alike.

The Obama administration has thus far issued waivers from Obama-care’s onerous requirements to unions representing 543,812 workers. By contrast, the administration has issued waivers for only 69,813 nonunion workers. While these waivers are a significant benefit, they accrue to a small fraction of the nation’s 14 million union workers. Further, many of the waivers have been granted on an annual basis, and no waiver has been granted for longer than two-and-a-half years. Eventually even union health plans are going to have to comply with Obama-care regulations.

Unions also secured a five-year delay in the imposition of the law’s 40 percent excise tax on high-premium health care plans, known as the “Cadillac tax.” The tax would hit insurance plans in which annual premiums exceed $10,200 for individuals or $27,500 for family coverage. This hefty tax is designed to both drive down premiums and help fund the law. However, the fact that unions often secure more generous and expensive benefit packages than those found in the nonunion workforce is one of organized labor’s biggest selling points. Unions weren’t going to go along with this tax without a fight, and they eventually cut a deal with Democrats shortly before the passage of Obama-care.

Initially, unions were supposed to be exempt from the Cadillac tax until 2018, while expensive plans for nonunion workers would be taxed starting this year. Exempting just unions from the tax would cost an extra $60 billion during Obama-care’s first few years of implementation. But rather than appear to do an expensive favor for just one key special interest, Democrats delayed the tax for everyone until 2018.

The problem for unions is that 2018 isn’t that far off. Five years may seem like a lot of time to lobby for another exemption, but union members have to agree to employment contracts years in advance. The Cadillac tax has already become a collective bargaining sticking point. This is especially true for public-sector employees, who typically have much pricier health care plans than nonunion workers. Public-sector unions may be the last sector of the workforce where it is common for employees to not have to contribute anything towards their health care, and the Cadillac tax will make it much more difficult for taxpayers to continue footing the bill.

This is poised to wreak havoc at the state level. In Pennsylvania, teachers in 168 of the state’s 500 school districts are working without contracts, and by the fall a majority of districts could be without contracts. Most of the negotiations in the state reportedly hinge on reining in health care benefits, rather than salaries. “District negotiators fear if unions do not make concessions now, an excise tax called for in the Patient Protection and Affordable Care Act, signed into law by President Barack Obama in 2010, could cost districts thousands starting in 2018,” reported the Scranton Times-Tribune earlier this month.

The other problem is Obama-care’s sticker shock. In the runup to the law’s passage, the White House was dismissive toward anyone who claimed the law’s morass of new rules would raise insurance premiums. Now no one really denies this is happening. Even though the Cadillac tax’s $10,200 and $27,500 premium thresholds were seen as defining exorbitant insurance plans, plans that don’t offer lavish benefits are becoming expensive enough to be subject to the tax.

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