The Building Tradesman Newspaper

Friday, July 24, 2015

Health care 'Cadillac Tax' still riles labor

By The Building Tradesman

WASHINGTON, D.C. - The 6-3 U.S. Supreme Court vote on June 25 over health care exchanges saved the Affordable Care Act as we know it.

The ruling was a huge win for President Obama, and it kept intact health care plans for some 7-9 million Americans who would have lost their insurance if the ruling had gone the other way.

In general, organized labor likes the idea of increased access to health care insurance for all Americans, with union leaders mostly lauding the Supreme Court decision. In practice, however, the refusal and/or inability of the Obama Administration to "fix" the ACA's "Cadillac Tax" with terms that are more cost-friendly to labor unions is continuing to rile building trades union leaders and others.

"Repealing the so-called Cadillac tax would fix a major flaw in the Affordable Care Act and prevent millions of Americans from facing cuts in their healthcare coverage," said Laborers General President Terrence O'Sullivan in a statement this month. "The tax, which was promoted as a way to rein in supposed excessive healthcare benefits for highly-paid executives, is expected to instead hit healthcare plans covering hundreds of thousands of hard working men and women, including LIUNA members, as insurance costs escalate faster than the thresholds."

According to the Cigna Insurance Co., the Cadillac Tax is scheduled to take effect in 2018, and is a 40 percent non-deductible excise tax on employer-sponsored health coverage that provides high-cost benefits - like those in the building trades unions and among other organized labor groups. On Feb. 23, 2015, the IRS issued a notice covering a number of issues concerning the Cadillac Tax, and requested comments on the possible approaches that could ultimately be incorporated into proposed regulations. No regulations have been issued to date.

O'Sullivan continued: "The so-called “Cadillac Tax” is particularly unfair to LIUNA members and those who rely on multi-employer healthcare plans for their health coverage. These plans will be forced to slash benefits in order to avoid the tax. The tax would take money out of the pockets of workers and their employers in order to subsidize low-road employers who have shirked their responsibilities."

The Cadillac Tax implies a levy on high-end benefit plans, but that's not the case, according to the National Coordinating Committee for Multiemployer Plans in its comment letter. "The parameters of the tax are such that many fairly basic plans will be affected merely because health care costs continue to increase," the group said. The NCCMP is comprised of labor, management and other interested parties that forged "Solutions Not Bailouts," a guideline that Congress passed in December which implements new accounting rules and allows plan benefit reductions in order to prevent multiemployer pension plans from going under.

Technically, benefit plans, not individuals, will be on the hook for potential increased costs. But the NCCMP wrote that "the practical reality of the marketplace is that the cost will be passed on in one way or another to plan participants and beneficiaries."

A 2013 letter from Teamsters President James Hoffa, UFCW President Joseph Hansen and UNITE-Here President Donald Taylor, addressed to then-Senate Majority Leader Harry Reid of Nevada and House Minority Leader Nancy Pelosi, said the Affordable Care Act with the Cadillac Tax would "shatter not only our hard-earned health benefits, but destroy the foundation of the 40-hour work week that is the backbone of the American middle class."

According to Politico, fixing the Cadillac Tax to the satisfaction of labor unions would blow an $87 billion hole in the federal budget. It's one of the last parts of the Affordable Care Act to go into effect, because Democratic lawmakers have found it so distasteful. The Obama Administration has made no move in the direction of repeal, but there are calls for repeal.

At least one House Republican lawmaker doesn't like it either - the tax provides a hit on nonunion benefit plans, too - and she has introduced a bill to repeal the Cadillac Tax. Plus a big backer of that party may be on board.

“It’s going to undermine the employer-sponsored system, and it’s going to do the exact opposite of what anyone’s vision of health reform would have done, which is to provide greater access to health care coverage,” said Katie Mahoney, director of health care policy at the U.S. Chamber of Commerce to Politico. “This is something that we are really trying to educate folks about.”