The Building Tradesman Newspaper

Friday, April 03, 2015

Affordable Care Act gets little love from building trades funds

By The Building Tradesman



LANSING - Building trades unions and the rest of organized labor have mostly supported the Affordable Care Act, on the theory that it's a good thing for more Americans to get access to health insurance.

Indeed, last year 3.8 million more people had health insurance compared to 2013, and in all, 13 percent of Americans remain uninsured, down from 16 percent in 2010, according to the Centers for Disease Control and Prevention.

But for labor unions, it's been a hard law to love. That's the word from Michael Novara of Novara-Tesija PLLC, a firm representing about a dozen multiemployer benefit funds in Michigan. "It has probably helped the general public, don't get me wrong, but from the perspective of a trustee on a fund and for fund attorneys, it really hasn't done much other than cost us a lot of money and headaches," Novara said on March 11. He was invited to give an update on the effects of the Affordable Care Act on union health and welfare funds to delegates at the Michigan Building and Construction Trades Council's 56th Legislative Conference.

Novara continued, ACA "is a big elephant in the room, it's a problem for all our health plans. Frankly it's been a big cost and compliance nightmare, and it really hasn't added much of a benefit for your participants."

There are about 20,000 pages of regulation associated with the Affordable Care Act, and the law is just now becoming more fully understood. One of the most significant aspects of the ACA pertaining to labor unions is the "Cadillac Tax," set to begin in 1918. It's a levy on generous, high-cost health plans like those operated by unions, which is intended to slow the growth rate of health care costs and help finance insurance coverage for more Americans.

Novara said fund managers have in recent months "finally" received direction from the federal government on how to proceed with the Cadillac Tax. The financial hit to union plans "is not as bad as we thought," he told delegates.

The ACA calls for a 40 percent tax on Cadillac plans that provide participants with $27,500 per year worth of benefits. In the building trades - considered a "high risk" occupation, the threshold is even higher, about $30,000. Initially, Novara said, it was feared that a 40 percent tax would be levied on the full $30,000. "That would have been a huge, devastating blow to your plans," he said.

But that's not the case. "If your plans are at $32,000, you're going to pay the 40 percent tax on the $2,000, not the full $32,000," he said. Some of the language regarding the Cadillac Tax continues to be open to interpretation. 

"Now, how do you get to that $30,000 or $32,000?" Novara asked. "We don't really know. The regulations are kind of vague, and again, like John (Tesija) said, the actuaries are the king. You're going to need your actuary, your health consultant, probably your legal, and your administrator - all your providers to help put in the numbers into this stew pot and spit out this big premium number."

Novara said the cost of health care for an individual would likely be based on the familiar COBRA setup - the price a worker temporarily pays for health insurance when he or she is in-between jobs.

Union health care fund trustees will generally have three choices as they plan for the 2018 Cadillac Tax. Option one, he said, is do nothing, if the plan is under the $30,000 threshold. Option two is also to do nothing, if the tax isn't significant and can be absorbed by the fund. Option three - if the tax is going to significantly hike costs - is to do something bad like increase contributions from participants or lower benefit levels so the funds can remain solvent. He said fund managers should be ready with numbers and options, but they should also be ready to abandon them.

Before the Cadillac Tax kicks in in 2018, there is a Supreme Court decision that's due this summer regarding the legal viability of the ACA, plus there's a national election in 2016 that could usher in a president and Congress who are hostile to the law, and would seek to overturn it. "That could make all this  go bye-bye," Novara warned.

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With the presence of the Affordable Care Act, is there an argument in favor of abandoning union-sponsored health care?

There is such an argument, but it's not a good one, Novara said.

"I always have participants and trustees who come up to me and say, why do we have these health care plans - we have the health care exchanges, we have Obamacare," Novara said. "Let's kill these things, let's put the money on the man's check and let him buy health insurance. He'll be happier, we won't have the headaches. Wrong. I'll give you some quick bullet points."

*"First, a union perspective," Novara said. "You have a three-legged stool. You have your pension, your health care and your training. Those are your selling tools, your marketing, your organizing. You don't want to lose any of those three. And from a funds perspective, this is the best bang for the buck you can offer your participants."

He said union members "can't get anything close" under the Affordable Care Act to compare with the quality of their present union-based coverage. "On paper, a few things may look similar, but if you dig deeper, they can't offer what you guys offer for the money. They don't offer any of the ancillary things you guys offer: dental and vision, life insurance, accidental death and dismemberment and disability insurance, IRAs, a whole host of things. They can't do it, they won't do it, it's too expensive."

*Union benefit plans, he said, "have a huge advantage. You run these basically as non-profits, as tax-exempt entities. To me this is the biggest one for your participants. You're buying great health care with pre-tax dollars. If you put the money on the guys' checks and kill these funds, you know what happens, they go out and buy Obamacare with after-tax dollars, that's a 20-to-40 percent swing. That's a lot of money out of the paycheck, for inferior coverage, mind you.

"As long as we can keep these plans healthy viable, we should do it, it really is the best bang for your participants' dollar."