The Patient Protection and Affordable Care Act (PPACA) as amended by the Health Care and Education Reconciliation Act, signed into law last March, is a “messy, politically-driven law” that presents unique challenges for LIUNA’s health and welfare funds and leaves many questions unanswered, said attorney James S. Ray, who delivered his opinion to a general session at last month’s LIUNA Tri-Funds Conference.
According to Ray, who specializes in employee benefits and labor law and works closely with LIUNA, the Union’s initial support of health care reform was premised on President Obama’s stated intention to cover the nation’s uninsured and contain sharply escalating health care costs, two problems that have long plagued the Taft-Hartley funds that provide health benefits to Laborers and their families. For decades, skyrocketing medical costs have forced LIUNA members to choose between wage increases and maintaining their health care benefits. Meanwhile, unfair cost-shifting, including the cost of providing care to the uninsured, has forced LIUNA’s health and welfare plans to subsidize medical care for the uninsured employees of non-union employers that do not offer employee health plan coverage.
“The point was to end unfair competition from non-union employers and contain costs,” said Ray, “not to make union employers and workers change our plans and pay higher costs.” He recalled Obama’s campaign promise: If you like your plan, you keep it; if you don’t like your plan or don’t have insurance, you’ll get other options.
However, said Ray, as reform was taken up by Congress, the focus shifted from covering the uninsured, containing medical costs and ending unfair cost-shifting to regulating the health plans of workers with coverage and raising tax revenues to offset the trillion dollar cost to the federal government’s budget. Politics, not sound policymaking, drove this change. A war against so-called health insurance industry abuses was declared to provide political cover. And, Laborers’ health and welfare funds, including the self-fundeds, were treated like insurance companies by Congress and the White House. The fact that the health and welfare funds are simply pools of workers’ money held in trust by labor-management trustees for the workers and their families was rejected by lawmakers as grounds for different treatment than the insurance companies. The fact that all of the costs of a health and welfare fund are paid by covered workers through collectively bargained employer contributions in lieu of wages was ignored.
The product of the rushed, politically driven legislative process is a series of benefit mandates, regulations and taxes that will raise the costs of operating a health and welfare fund, requiring increases in collectively bargained contributions for many funds at the expense of wages and jobs, explained Ray.
For example, he noted that Congress originally proposed to tax workers directly on their health plan coverage by repealing the so-called tax-exclusion for employer-provided coverage. When the Labor Movement, including LIUNA, protested loudly that such a tax violated President Obama’s no-tax campaign pledge, lawmakers reluctantly backed off. But, led by Senate Democrats, Congress soon developed a substitute idea: a 40 percent tax on “high cost” or “Cadillac” health plans. The very intent of this tax is that it will be passed through to workers and their families; yet the new law itself raises costs that will force more plans into the tax zone.
This “high cost” plan tax was included in the final health reform legislation over the strong objections of LIUNA and most of the Labor Movement, although some last minute concessions were made to defer the impact on Laborers’ health and welfare funds.
Ray suggested that PPACA’s failure to effectively address unfair competition by non-union employers is even worse than the law’s cost-raising effects on health and welfare funds. Congress refused to require employers to provide employee health plan coverage or even to contribute to the cost of employees’ health care. Rather, starting in 2014, the new law imposes a “free rider” tax on large employers whose full-time employees obtain a government subsidy for coverage through state-established Health Exchanges. But, to cushion the effect of the requirement on smaller businesses, Congress exempted employers with 50 or fewer employees. This exemption means that most non-union building and construction contractors can continue to escape all financial responsibility for their employees’ medical care and that union members will continue to bear unfair cost-shifting for non-union workers who will receive government subsidies for coverage.
As he saw the health reform legislative process take a dangerous turn against health and welfare funds, LIUNA General President Terence M. O’Sullivan forcefully challenged Congress and the Administration to protect the funds and their participants from costly benefit mandates, regulations and taxes. According to Ray, who was present at many of these meetings, O’Sullivan was passionate in delivering his message and he made a difference. “Terry’s personal leadership of the fight against the high cost plan tax is largely responsible for policymakers’ last minute decision to defer the tax from 2014 to 2018 and to substantially raise the tax threshold for health and welfare funds.”
Because PPACA was passed in a rush of last minute political maneuvering, many of its provisions are unclear and many key questions are unanswered. To deal with these questions, Congress vested various government agencies – primarily the Department of Health & Human Services, the Labor Department and the IRS – with extraordinary regulatory authority to implement the law. These agencies are already busy developing and issuing regulations interpreting and supplementing PPACA.
Some of the new law’s provisions will soon take effect. Unlike most earlier employee benefits law, PPACA does not include a deferred effective date for collectively bargained health plans. So, health and welfare funds have to focus now on how to deal with various benefit mandates and regulations.
Come 2014, even more fundamental changes will become effective. Health and welfare funds will have to review how they can best provide value to the members in this new world. According to Ray, “Our biggest challenge comes in 2014, when we have to re-imagine the role of health and welfare funds in serving LIUNA members.”
Ray elaborated on the views expressed in his general session presentation at one of two health care reform-related workshops that were coordinated by the LHSFNA. Along with Kathryn Bakich, Senior Vice President at The Segal Company, he presented at “Health and Welfare Fund Compliance with PPACA.” At the other workshop, “Health Care Reform: How It Will Impact LIUNA Members,” James E. Conlon, Principal, Milliman, Inc., and Ian Duncan, President of Solucia Consulting, were the presenters.
The LHSFNA’s Health Promotion Division is monitoring the new rules as they emerge and has established a webpage with links to the specifics. The period ahead is likely to impose significant administrative and funding concerns for LIUNA health and welfare funds, and Division staff is available to help funds consider and evaluate their options. For consultation and assistance, call 202-628-5465.