The Affordable Care Act has had its share of supporters and detractors on both sides. However, one of the more vocal groups to offer their input on the many mandates that comprise the law are the major labor unions in the United States. Some have been very forthcoming about their support for the new requirements while others have had strong opposition to what Obamacare means for their respective memberships and labor matters across the board when it comes to health insurance plans.
At the time Obamacare was being debated and implemented, the labor unions were not entirely sure whether or not to back the measures that were associated with the new mandates and requirements. Once the bill was passed and upheld by the Supreme Court, the largest unions were supportive of the new law, each one releasing press statements declaring the Affordable Care Act a victory for the millions of Americans who were going without insurance at the time.
Yet despite their outgoing approval of the requirements under Obamacare, the same unions also lobbied to become exempt from many of the portions of the bill. They worried that the mandates would potentially force members off the unions’ group health plans to find alternative coverage through the exchanges and abandoning the group union coverage plans that are already in place.
In 2013, President Obama granted certain exemptions to a number of union groups, including the United Food and Commercial Workers International Union (UFCW), the American Federation of State, County and Municipal Employees (AFSCME), the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), the International Brotherhood of Teamsters (IBT), the United Steelworkers (USW), the Service Employees International Union (SEIU), and the Union of Needletrades, Industrial and Textile Employees – Hotel Employees and Restaurant Employees International Union (UNITE-HERE), among others. These are the largest examples of the unions that were given exemptions from paying tax penalties on self-insured group plans under the new law.
The unions lobbied to receive an exemption because the health plans that are offered through established collective bargaining agreements, such as those available through union membership, usually come with increased benefits that are typically not found with employer-sponsored plans.
In addition, there is also the looming Cadillac Tax that is set to take effect in 2018, a thorny subject with the unions and a stipulation of the new mandates that was postponed under pressure from these same labor organizations. Their most pressing concern over this tax is how it could impact the generous benefits that union health plans offer over the common employer-sponsored coverage or private insurance.
The Cadillac Tax
The fancy name aside, this new mandate will become valid on January 1, 2018 in the form of a 40% tax imposed on each dollar paid towards premiums higher than $10,200 on individual coverage plans and $27,500 for family coverage. At issue is the intention behind the reason for the Cadillac Tax in the mandates of the Affordable Care Act as a method for bringing in revenue to help provide funding for the new law.
Estimates from the Congressional Budget Office (CBO) find that the Cadillac Tax could be responsible for generating $120 billion for the subsequent five years after it goes into effect. The majority of that money will be a result of higher taxes on employee wages and not tax-exempt coverage benefits.
The problem that the unions have with the Cadillac Tax (far beyond it being an excise tax which is among the worst types of tax to be saddled with in any capacity) is the potentially negative impact it will have on the unions’ health plans. All the time and effort that union leadership put into negotiating generous health benefits may ultimately serve to hurt, not help, members who are enrolled in union-backed coverage. With the Cadillac Tax being applied, premiums will only go up instead of down for union members who have their insurance through a union group plan.
However, that’s kind of the point, as imposing the Cadillac Tax will encourage members to leave their current insurance behind and apply for something that falls more in line with the standards of the Affordable Care Act. Those standards include greater access to insurance plans, ensuring that the companies put the money from their premiums towards healthcare for patients and not into their bank accounts, and driving down the costs for consumers trying to find affordable coverage. President Obama has even claimed as much in discussing the aims and goals for Obamacare, saying that the Cadillac Tax will minimize health plans that don’t participate in cost-sharing and premium contributions.
The only way Obamacare is well and truly able to operate successfully is when everyone pitches in. That’s where the Cadillac Tax comes in. As the costs of healthcare demonstrate a steady rise over time, so too will the excise tax as it applies to more plans every year, just to cover all the costs that are inherent to Obamacare. Many detractors argue that the 40% tax will be considered a luxury once that number increases all the way up to 60% by the time 2022 rolls around.
More Unions Want In
While the unions we’ve mentioned certainly aren’t the only ones receiving major exemptions from the Affordable Care Act, there are some prominent labor unions in the country who feel they should not be considered exempt from receiving the same exemptions.
Take the Writers Guild of America, for instance, whose members feel that they should be free from the Cadillac Tax because it would all but render the union’s health plan useless. It would greatly reduce the benefits that the Guild worked so hard to obtain and represent an undue burden on the men and women who work in the film and TV industry.
These high-quality benefits and plans would see a drastic reduction across the board once 2018 rolls around which is why the WGA is working towards becoming exempt from Obamacare like the SEIU and the AFL-CIO. One of their chief arguments is the suggestion that every union serves its industry in a unique fashion, addressing the challenges and obstacles that members face exclusive to that field. Benefits are provided based upon the needs of each industry and providing exemptions for certain labor unions and not others is unfair.