New Obamacare costs snarl union contract talks

Workers and employers tussle over who should pay for new costs that are tied to the Affordable Care Act.

By Money Staff May 27, 2014 2:21PM

This post comes from Kris Maher and Melanie Trottman at partner site The Wall Street Journal.

The Wall Street Journal on MSN MoneyDisputes between unions and employers over paying for new costs associated with the Affordable Care Act are roiling labor talks nationwide.

Unions and employers are tussling over who will pick up the tab for new mandates, such as coverage for dependent children to age 26, as well as future costs, such as a tax on premium health plans starting in 2018. The question is poised to become a significant point of tension as tens of thousands of labor contracts covering millions of workers expire in the next several years, with ACA-related cost increases ranging from 5 percent to 12.5 percent in current talks.

In Philadelphia, disagreement over how much workers should contribute to such health-plan cost increases has stalled talks between the region's transit system and its main union representing 5,000 workers as they try to renegotiate a contract that expired in March.

Roughly 2,000 housekeepers, waiters and others at nine of 10 downtown Las Vegas casinos voted this month to go on strike June 1 if they don't reach agreements on a series of issues, the thorniest of which involve new ACA-related cost increases, according to the union.

Flight attendants at Alaska Airlines voted down a tentative contract agreement with management in February, in part because it didn't provide enough protection against a possible surge in ACA-related costs, union members said. They are still without a new contract.

Labor experts on both sides say the law doesn't take into account that health benefits have been negotiated by employers and unions over decades, and that rewriting plans to meet new requirements can affect wages and other labor terms.

"It's been a challenge for even some of the stronger unions to maintain the quality health plans that they have offered over the years," said Daniel Murphy, an attorney in New York who represents employers in labor talks.

Among the earliest supporters of the health-care law, unions have unsuccessfully tried to win concessions from the Obama administration on some issues now involved in the labor talks.
An Obama administration official said: "We have worked hard to smooth implementation" of the health law.

One pressure point is the higher costs of new mandates, especially the requirement that health plans expand coverage for dependents. For Unite Here, adding that coverage for 14,000 dependents raised costs in the health-care fund run by the union's Las Vegas local by $26 million since 2011, said union spokeswoman Bethany Khan.

The union plan covers 55,000 workers and 120,000 people in total. Casinos on the Strip have agreed to pay more to meet the higher health-care costs, according to contract summaries. Unite Here President D. Taylor called the rising costs tied to the health law the biggest hurdle to reaching settlements in Las Vegas.

David Strow, a spokesman for  Boyd Gaming Corp., which operates two of the nine Las Vegas casinos that have yet to reach a pact with the union, declined to comment on the health-care-related terms being negotiated. "We're making good progress," he said. Other casinos didn't respond to requests for comment.

Uncertainty about future costs is also hampering negotiations. One of the biggest looming unknowns is the so-called Cadillac tax on high-cost health plans scheduled to take effect in 2018. The provision imposes a 40 percent tax on the annual cost of health care above $10,200 for individual coverage and $27,500 for family coverage.

The regional transit system in Philadelphia, Septa, estimates the tax will boost its health-care costs by $15 million a year, or 12.5 percent of the $120 million it currently spends each year on health coverage. The transit system is already incurring several million dollars in added costs from other provisions, said Richard Burnfield, Septa's chief financial officer.

Medical doctor © Corbis/SuperStock"How do you deal with that?" he said. "The options you have are you just suck it up and pay for it, or you look at plan design. Do you increase employee contributions?"

Transport Workers Union Local 234, Septa's biggest union, has rejected a proposal that its members contribute an additional 1 percent of pay to help cover new ACA-related costs, said Willie Brown, president of the union, which represents 5,000 bus drivers, train operators and others. "They're asking us to negotiate in the dark," said Mr. Brown. He said he didn't trust Septa's estimates.

Union officials say the law penalizes so-called union-sponsored multi-employer health plans, which are jointly run by unions and primarily small employers, and which cover workers from multiple companies in industries such as construction, trucking and retail.

People in those plans aren't eligible for the subsidies toward the cost of premiums that the law offers some people buying coverage on their own. And many multi-employer plans also must pay a $63 tax this year per covered individual to help subsidize plans sold through the new insurance exchanges. Unions and large employers had campaigned against the fee, which drops to $44 in 2015. Under regulations released in March, some labor unions and businesses will get a break, but union officials have said the vast majority of its plans don't fit the definition required to qualify.

The Obama official said the administration had worked at "providing multiemployer plans flexibility where possible." The official said that labor's request that people in such plans qualify for the subsidy couldn't be granted, according to administration lawyers.

Another provision of the law that eliminates caps on annual and lifetime health-care costs has forced multi-employer plans to purchase their own insurance to prevent potential runaway costs from bankrupting plans.

Jim Ray, a lawyer who represents the Laborers International Union of North America in benefits negotiations, said these provisions have increased construction-industry health plans' costs by 5 percent to 10 percent, and already resulted in lower wages for some laborers. He said employers are frequently seeking contract language to cap their own liability for future cost increases from the law.

"When we first supported the calls for health-care reform, we thought it was going to bring costs down," he said.

In other cases, the law has resulted in some workers losing coverage from multi-employer plans. Last year, the United Food and Commercial Workers agreed to eliminate existing coverage for thousands of newer part-time workers at New England supermarkets, in order to preserve benefits for full-time workers.

The union says it replaced the coverage with a combination of benefits, including health savings accounts. Elsewhere, the union has agreed to several supermarket contracts that eliminate health coverage for certain members' spouses who have coverage available elsewhere.

"On a broad level, the biggest challenge facing all our negotiations is certain provisions the Affordable Care Act is demanding on plans," said Jill Cashen, a UFCW spokeswoman.

More from The Wall Street Journal


May 27, 2014 3:24PM

The moronic Union leaders supported Obamacare, they should bear ALL NEW COSTS associated with the law they supported.  Let them go on strike and stay on strike until they either agree to pay for Obamacare that they supported or until the democrats repeal it.

But companies shouldn't agree to pay ONE DIME of the extra costs.  The Unions made their bed, now they need to sleep in it...

May 27, 2014 3:49PM

Too bad the Unions were lied to.  AARP, unions, medical staff, citizens, veterans, students, need I go on...  When you vote for the man who promises everything, you get nothing. 

May 27, 2014 3:06PM
NO Problem,   just pass the cost on to the consumers !                                                                                  Did you expect a different outcome ?

Not Sarcasm, Just REALITY !
May 27, 2014 3:44PM
I guess the union guys and gals are just now figuring out that inserting the word "Affordable" into the name of a law doesn't make it so.

This is pretty much along the lines of "we have to support passage of the PPACA into law to find out what's in it" . . . gee, I wonder from whom they learned that???
May 27, 2014 4:11PM
May 27, 2014 5:00PM
Waiting for the first liberal to post either:
a)  "This is all Bush's fault", or
b)  "This is all the result of Republican opposition to Obamacare"
May 27, 2014 4:34PM
But... but... I thought everything was peaches and cream with Obama's glorious healthcare plan. That's what we've been constantly told by D.C.; the media; and the media darling himself, Obama, since the first day Obama presented it in the media. There shouldn't be any problems with it. We were told it would help save America. But... but... 
May 27, 2014 4:26PM
When you enter into an unholy alliance with this Administration, you shouldn't be surprise when it comes back to bite you.
May 27, 2014 4:51PM
No problem, they can pay for the increased cost from the $2,500 per insured that Obama promised each would save under Obomacare.  What are they complaining about????
May 27, 2014 7:43PM
In the words of Nancy Pelosi........... ObamaCare is beautiful. Remember that on election day this time. Vote out democrats. 
May 27, 2014 6:56PM
Costs? It is a huge savings to everyone. Just ask Obama!
May 27, 2014 6:29PM
It doesn't matter who pays, the union or the companies. The consumer that purchases the product or service is the one that pays in the long run.
May 28, 2014 7:12AM
Where are the libtards posting that this is just a Fox news story?
But But, I thought the Unions were all for Obama care. They saw it as a way to save money. Now go figure.
May 28, 2014 10:02AM
The Democrat and the unions deserve each other. As thier delusional world views are steam rolled by reality, perhaps they will annihilate each other.
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