GOP Leery of Labor's Push for a Health Care Law Fix

A simmering conflict between organized labor and the Obama administration over the 2010 health care law could drive a wedge between the White House and one of its most reliable backers. Congressional Republicans, on the other hand, are eager to expose the divide and warn the administration they will firmly oppose any attempt to acquiesce to labor’s concerns.

At issue is an oversight in the 2010 law (PL 111-148, PL 111-152) that leaves uncertain the future of the unique health care funds that employers have been negotiating with the unions representing their workers for more than 60 years.

Unions say that without a fix, the health care law could lead to millions of union members losing the relatively generous health care plans they have earned through negotiations with employers. As a result, they say, there would be millions more people eligible for tax credits to buy insurance through the health exchanges set up by the 2010 law, draining the federal budget.

“On behalf of the millions of working men and women we represent and the families they support, we can no longer stand silent in the face of elements of the Affordable Care Act that will destroy the very health and well being of our members along with millions of other hardworking Americans,” the heads of three unions wrote in a joint letter to Democratic congressional leaders in July.

The health plans — known as multiemployer or Taft-Hartley plans after the law that regulated them — make it possible for unionized workers to get coverage even when the nature of their work requires them to frequently change employers. According to union officials, these funds cover roughly 20 million people, many of whom work for small businesses.

Under such plans, the unions and employers within an industry agree to set up a jointly managed health care fund that would cover workers even as they move from employer to employer. That means a construction worker who changes jobs or who spends a few weeks out of work would not lose insurance.

Unions say the funds are financed by worker contributions. Workers agree to take a share of the wages they would otherwise receive and direct it to the fund. For tax purposes, however, that money is considered an employer contribution, and employers receive tax write-offs. In some cases, the funds cover all medical expenses, completely shutting out insurance companies.

“The health care funds are just pools of workers’ money dedicated to their exclusive benefit,” said James Ray, benefits counsel to the Laborers’ International Union of North America.

It’s a unique arrangement, one the health care law does not address. How to treat these Taft-Hartley plans therefore depends on one’s interpretation of the law.

Unions say the multiemployer funds are nothing like the employer-subsidized health plans that many nonunion workers participate in. That means, Ray said, the funds should not be charged the same fees the 2010 health care law will charge the insurance companies issuing those typical plans.

In particular, the laborers union objects to an annual fee of $63 per beneficiary to help defray some of the costs of expanded coverage under the law. Since the Taft-Hartley plans aren’t an insurance company — and, in some cases, are fully funded — they should not be forced to subsidize the insurance industry, he argues.

“They’re treating our plans as an insurance company and we’re not. We’re self-funded plans,” he said.

Experts say that without a fix, there will be an incentive for employers to abandon the Taft-Hartley plans rather than pay the increasingly higher fees under the 2010 law.

“Employers who have done the right thing for decades are now being penalized from a competitive standpoint by having provided benefits when their competition doesn’t and their employees get access to subsidized care,” said Randy G. DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans.

Rather than continuing to offer the multiemployer plans, employers could now be tempted to scrap them and direct their workers to the health insurance exchanges, which would offer subsidies to lower-income workers.

“Over 90 percent of these employers are below the 50-employee threshold,” below which employers are not penalized for not offering insurance, DeFrehn said. “The penalties that were designed to keep these employers in the system don’t apply.”

As a result, millions more workers could become eligible for the subsidies than policymakers had anticipated, driving up the 2010 health care law’s cost, experts say.

Unions have been raising the issue with the administration ever since the law was in the drafting stage. But lawmakers postponed addressing the Taft-Hartley plans as they sought to get the bill through Congress. For the past two years, labor leaders have continued quietly pushing the administration to make the fixes administratively, so far with little success. But their frustration bubbled over when the administration announced in July that a requirement that all midsize and large employers offer health insurance would be delayed a year.

Shortly after the administration’s announcement, leaders of the International Brotherhood of Teamsters, the United Food and Commercial Workers and UNITE-HERE, which represents hotel and restaurant workers, wrote to Senate Majority Leader Harry Reid, D-Nev., and House Minority Leader Nancy Pelosi, D-Calif., asking for changes to the law. Terry O’Sullivan, the head of the laborers union, also wrote to President Barack Obama.

Since that volley of letters, however, union leaders have sought to downplay the tensions with the Obama administration. Spokesmen for the Teamsters and the roofers union declined to comment. But AFL-CIO President Richard Trumka could not evade questions about the health care law during a recent breakfast with reporters organized by the Christian Science Monitor.

While he called the law “a major step in the right direction,” Trumka acknowledged it needs some “tweaks.” And since it’s hopeless to expect a bitterly divided Congress to approve any changes to the law, Trumka said, labor unions are pinning their hopes on the administration’s rule-making.

“We’re been working with the administration to find solutions to what I think are inadvertent holes in the act,” he said. “When the act was put together it wasn’t thought completely through.”

It remains to be seen how effective those conversations will be.

“I think the administration appreciates their situation, but I don’t think there’s much the administration can do,” said Timothy Jost, a health care expert and law professor at Washington and Lee University. “I think fundamentally, the problem is that the legislation wasn’t written to recognize their distinctive situation.”

Republicans in Congress are already giving notice they will object to any administrative fix.

In the Senate, John Thune of South Dakota, the Republican Conference chairman, introduced legislation (S 1487) this week to bar the Obama administration from making the administrative changes that the unions are seeking.

In the House, Education and the Workforce Chairman John Kline, R-Minn., and Ways and Means Chairman Dave Camp, R-Mich., last week asked the Congressional Budget Office and the Joint Committee on Taxation to study the costs of extending tax credits to people covered under multiemployer plans.

Republicans have been pointing to a March memo from the Congressional Research Service saying that people enrolled in Taft-Hartley plans would not be eligible for tax credits and that the plans would not count as eligible plans under the exchanges.

“Our view, and the one supported by the report we got from CRS, is if you participate in a multiemployer health care plan, then by law you aren’t eligible for the tax subsidies that are only available to those who purchase health insurance through the government exchanges,” a House GOP aide said.

Camp and Sen. Orrin G. Hatch of Utah, the senior Finance Committee Republican, wrote another letter about the issue Tuesday to three Cabinet secretaries in which they warned: “We will do whatever is within our power to ensure that the administration does not once again provide a special exemption to unions at the expense of American taxpayers.”

Other Republicans are pointing to the unions in their efforts to rally the faithful against the health care law. “Unions are saying they want an exemption. Well, I’ve got a simple question, Mr. President, how about an exemption for hard-working American families?” Sen. Ted Cruz, R-Texas, said at a tea party rally Tuesday outside the Capitol.