The Magazine

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?

EPA / MICHAEL REYNOLDS

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.

In Massachusetts, which has the highest average health care costs of any state thanks to the Bay State’s own misguided experiment expanding health care coverage, over half the state’s employees will be subject to the tax, according to a report by the Pioneer Institute. The report goes on to highlight that the tax is particularly punishing for middle-income public employees in Massachusetts. From 2018 to 2028, a police officer on a typical family plan will be subject to an extra $53,907 in new taxes. A teacher on an individual plan will owe an extra $20,807. Even granting that the problem is acute in Massachusetts, it’s safe to assume the Cadillac tax is going to cause turmoil across the country between public employees who have become accustomed to gold-plated health packages and taxpayers who are increasingly unable to pay for them.

Obama-care presents some additional challenges for those union members who aren’t public employees. Many employers of low-wage workers have expressed concern that they may have to drop existing health coverage, as Obama-care has outlawed the salient features of many cheaper insurance options. Offending plans had benefit caps and other drawbacks but were often the only affordable option for low-wage workers.

Owners of chain restaurants were particularly vocal about this problem, and in some cases subject to public opprobrium from Obama supporters for expressing concern that they might have to cut jobs or drop insurance as a result of the law. Now unions are expressing the same fears for the same reasons. Yet again, unions want a special dispensation for their own low-wage workers. The AFL-CIO, Teamsters, Unite Here Health, and other powerful unions are lobbying to let low-wage union workers remain on their existing insurance plans, while also collecting an Obama-care subsidy that is supposed to go only to low-wage workers without employer coverage.

The Obama administration hasn’t ruled the idea out. “These matters are the subject of pending regulations,” a Treasury spokesman told the Wall Street Journal. Aside from the question of cost, it would seem difficult for the administration to justify allowing only union workers to collect a subsidy on top of an existing insurance plan. If union workers lost their employer insurance coverage, they could take comfort in the fact Obama-care has a surprisingly expansive definition of who’s poor enough to qualify for government assistance to pay for health care. A family of four making up to $92,200 a year would qualify for a subsidy, and the subsidies are proportionally larger for those with lower incomes.

Beyond the specifics, what union leaders are really saying is that they have no confidence Obama-care will live up to its central promise​—​that the government can provide millions of uninsured Americans with health care coverage that both is affordable and meets their needs.

Surely organized labor must realize that Obama-care has only begun to be implemented. If the Democrats’ most ardent constituency and most prolific fundraisers are already having second thoughts about Obama-care​—​fearful that besides being expensive and unworkable, the law will make unions less attractive to workers and undermine collective bargaining​—​the law may be less secure than its apologists assume.

Mark Hemingway is a senior writer at The Weekly Standard.

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