Thursday, September 19, 2013

Thoughts on Obama administration denying union attempts for an ACA waiver

UPDATE: There's a political dimension to this, which I'll deal with in another post.

Ezra Klein, Politico and Avik Roy  reported that the Obama administration denied a key waiver sought by labor leaders for a type of multiple-insurer insurance plan that covers more than 20 million American workers.

Unions,  particularly the Teamsters, United Food and Commercial Workers and the garment workers union (UNITE HERE) wanted the Obama administration to make these plans (called "Taft-Hartley" plans after the legislation that created them) eligible for subsidies offered under the new state health exchanges. As Klein notes, however, they don't comply with some of the requirements of the exchange plans (general issue for example) Also, the plans are already tax-exempt -- and will be until 2018 when taxes will be levied on the company-paid plan premiums in excess of $10,000 for an individual and $27,000 for a family.

Labor is a bit miffed because they believe that the administration is delaying regulations for businesses while leaving labor out. I'm sympathetic to this, but I'm not really sure how how the administration could have ruled otherwise. If they make this exemption for the labor plans, it might open up Pandora's box. How will they stop businesses from claiming both subsidies and tax-exemptions for offering insurance?  How will they deny insurers who want to open plans on the exchanges that don't have guaranteed issue (i.e. exclude sick people)? It has the potential to undermine some pretty big parts of the Affordable Care Act in the way the delaying other regulations for 12-24 months won't.

What are the ramifications of the Obama administration's refusal to grant a waiver for these plans? The short answer is that we don't know. There are several shifting incentives here that may shift the state of the Taft-Hartley plans in a variety of directions.


However, one thing is comforting: Workers currently covered by these plans will have affordable health insurance options regardless of what happens. They might get to continue coverage under their current plans, they might get to continue coverage under adjusted plans that qualify for subsidies, or they might end up on the health insurance exchanges like Trader Joe's part-time employees. Under the last scenario, workers with better incomes will pay a bit more out of pocket for a plan, while those less well off will pay less. The bottom line is that the workers don't get screwed, like they do all too often when companies engage in cute reorganization tricks.


Beyond that, however, there are some big unknowns: Unions fear that the availability of the exchanges will encourage small businesses that pay into these plans to opt-out and go to the exchanges, destroying  a major visible benefit that organized labor has won through years of membership agitating.  However, I'm not sure that result will come to pass. First, it's possible (though I could be wrong) that the small-business tax incentives to provide insurance coming on line over the next few years might actually convince businesses to stay in these plans. I'm also not aware of any Taft-Hartly plans going under in Massachusetts' reform, which would be an indicator that these sorts of plans are non-viable in a health care world dominated by the Affordable Care Act.

(Again, I don't know what the AFL-CIO economists are saying on these issues -- and I wish I knew, because it would inform my speculation more. The union-backed letter to congressional leaders doesn't really get into policy details)

Finally, even if these plans go away, the reality would open up all sorts of new opportunities for labor unions. If employers pull out of the plans and save a ton of money thanks to government subsidies,  it sounds like union members have a big case to make for a larger-than normal raise so workers can share in the companies new windfall. Or perhaps they can argue for more generous company contributions to pension and 401k plans. Or maybe they can get big investments and improvements in equipment and safety procedures.  The point is that with health care off the table (and secure) there's plenty of issues around which to mobilize the rank-and-file. I'd imagine that it would be quite easy to fire up a bunch of construction workers by saying "Hey, they dumped you on the exchanges and saved a ton of money -- we should get to share in those profits too."

I suspect there are also going to be some opportunities over the coming months to work with the administration to iron out nuts and bolts -- possibly make the plans exchange compliant through general issue and swapping out the current tax-free nature in exchange for making them eligible for subsidies. This course of action carries some opportunities and risks of its own.

Addendum: I observe that we have an assistant treasury secretary named Alastair Fitzpayne. This is outstanding. If he didn't exist, the Onion would have to make him up.

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