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Obama To Labor Unions With Multi-Employer Health Plans: Drop Dead

September 14, 2013

By Avik Roy

Well played, Mr. President. Last week, prior to the big AFL-CIO convention in Los Angeles, President Obama personally spoke to AFL-CIO chief Richard Trumka, asking him to water down several anti-Obamacare resolutions that union leaders were planning to pass there. Trumka obliged, keeping calls to repeal Obamacare out of the official AFL-CIO resolution on the health law. Then, on Friday evening, after the convention was over, the Obama administration revealed that it would ignore unions’ demands to subsidize their members using Obamacare. As a result, some unions fear that they will wither away. “I guarantee you by your next convention four years from now, you won’t meet a quarter of this room,” said Joseph Nigro, president of the Sheet Metal, Air, Rail and Transportation Union. “We won’t be here.”

Unions were seeking special treatment under Obamacare

This latest development was first reported by Ezra Klein of the Washington Post. Here’s the issue that was at stake. A number of labor unions participate in multi-employer health plans, also known as Taft-Hartley plans. These plans allow unions to organize, say, all the restaurant workers in a particular county, taking advantage of the economies of scale that come from a larger insurance pool.

The problem is that, thanks to Obamacare’s employer mandate and its subsidized insurance exchanges, businesses with fewer than 50 employees now have an incentive to drop health coverage for their employees and let those workers get coverage on the exchanges. It’s a better deal for those workers, and a better deal for their employers. But it’s a big blow to the labor unions who organize the plans, because workers no longer need unions to negotiate or obtain their health coverage.

As a result, the unions most affected by this problem—like Joseph Nigro’s SMART; or Joseph Hansen’s United Food and Commercial Workers International Union; or D. Taylor’s UNITE-HERE hotel, airport, food service, gaming, and textile union—have been raising a ruckus, demanding that the White House reinterpret the Affordable Care Act so as to ensure that Obamacare’s exchange subsidies, which were intended for the uninsured, would also be available to their members.

Otherwise, labor leaders wrote, Obamacare would “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.” According to the National Coordination Committee for Multiemployer Plans, approximately 26 million workers are covered by multi-employer or Taft-Hartley plans today.

The text of the ACA is clear: No additional subsidies for the already-insured

Unfortunately, for the unions, there’s a problem. The statutory language of the Affordable Care Act is clear. The only people eligible for subsidies in Obamacare’s insurance exchanges are people who don’t already have coverage. As Alastair Fitzpayne, Assistant Secretary for Legislative Affairs for the Treasury Department, puts it in a letter to Sen. Orrin Hatch (R., Utah) and Rep. Dave Camp (R., Mich.), “An individual cannot benefit” from both the tax break for employer-sponsored coverage and the exchange subsidies if “the individual is covered by a single-employer plan or a multi-employer plan.”

Fitzpayne isn’t the only one with this opinion. The non-partisan Congressional Research Service, Congress’ in-house think-tank, published a report concluding that “multiemployer health plans are considered generally to be employee benefit plans subject to regulation under the Employee Retirement Income Security Act…it seems unlikely that an individual who is enrolled in a multiemployer health plan would be eligible for a premium tax credit.”

That’s why unions are frustrated. They warned of “political repercussions” if the Obama administration didn’t circumvent the law on their behalf. Obama kept them at bay by assuring labor leaders that he was working on the problem. Unions told Harry Reid and Nancy Pelosi that “we have a problem [and] you need to fix it.”

But with Republicans in firm control of the House of Representatives, Democrats have no ability to unilaterally rewrite Obamacare in order to please labor leaders. On Wednesday, Terence O’Sullivan, president of the Laborers’ International Union of North America, said, “If the Affordable Care Act is not fixed, and it destroys the health and welfare funds that we have fought for and stand for, then I believe it needs to be repealed.”

A century ago, labor unions opposed government health insurance

It’s for these reasons that labor unions historically opposed government-sponsored health insurance. Unions have long known that a major reason that people join unions—and thereby a major source of their income and power—comes from their role as the middleman who negotiates health benefit plans with employers. If the government offered health insurance directly to workers, workers would have much less need to unionize.

Over time, however, unions came to see government-sponsored health coverage as a way to expand the coalition of progressive voters who supported a more expansive government generally. And so unions got on board with Obamacare, and fought hard for its passage and for Obama’s re-election.

The great irony—one that union leaders are only now starting to recognize—is that by doing so, they’ve accelerated their own demise, at least in the private sector. Today, less than 7 percent of American private-sector workers are unionized. That number will continue to decline as workers realize they don’t need unions for their health benefits. The labor movement will increasingly become comprised of public-sector unions, giving it a far different character than it has today.

Most importantly, workers will benefit from this change. Instead of paying a big chunk of their wages to labor unions and insurance companies, they’ll be able to keep those wages for themselves. They’ll benefit from working for companies that have more flexibility to grow and evolve over time, because they’re not tied down by labor union contracts. And they’ll benefit from being able to better choose the insurance plan that is right for them and their families. Sorry, Richard Trumka.

Original Source: http://www.forbes.com/sites/theapothecary/2013/09/14/obama-to-labor-unions-multi-employer-health-plans-drop-dead/

 

 
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