by: Adam C. Abrahms, Kara M. Maciel, Adam C. Solander, and Steven M. Swirsky
On September 13, 2013, the Obama Administration rejected the union movement’s intense lobbying efforts to seek a waiver, so that their members would be able to receive tax subsidies in the Affordable Care Act (“ACA”) Marketplaces for those of their members who will be offered “affordable coverage” from their employers.
Beginning January 1, 2015, the ACA requires that large employers offer affordable health coverage that provides minimum value to their “full-time employees” (those working 30 hours or more per week) or pay a penalty. If an employee is not offered health insurance, or if the coverage offered does not meet the definition of “affordable” or does not provide minimum value, the employee may go to the Marketplace (formerly known as the Exchanges) to purchase coverage. In such cases, certain employees may receive a tax credit or premium subsidy in the Marketplace to help defray the cost of obtaining health coverage.
For many unionized employees, health care is provided through a Taft-Hartley multi-employer plan. Such plans will be required to be affordable and comply with the ACA’s plan design obligations, just like private employer-sponsored health plans. Employees who reject employer-sponsored coverage that complies with the ACA in order to obtain cheaper coverage through the Marketplace are not entitled to the same tax breaks as uninsured employees.
Labor lobbied hard for the ACA and spent millions getting President Obama elected several years ago. Now, much of labor has grown disenchanted by the Administration’s regulatory rulings and ObamaCare as a whole. This summer, labor union leaders from UFCW, UNITE-HERE, and the Teamsters sent a scathing letter to Congressional leaders criticizing the ACA’s new definition of a “full-time employee,” stating that “it will destroy the American workforce.” Labor unions – who depend on the promise of free or cheap health care to attract members – fear they will lose members and their leverage to organize new dues-paying members if employees can go to the Marketplace to obtain less expensive health care.
Big labor, however, wants to have its cake and eat it too. While the Taft-Hartley plan trust funds continue to unilaterally impose annual premium cost increases for the health and welfare plans covering many unionized employees, in recent weeks, labor has demanded ACA reforms providing tax breaks for unionized employees who receive coverage under these plans. Under their waiver plan, unionized employees (but not non-unionized employees) would get the same tax breaks as uninsured workers if their members want to purchase coverage in the Marketplace. Last week during the AFL-CIO Quadrennial Convention, the labor giant adopted a harsh resolution calling for these and other pro-labor changes to the ACA.
Days before, in anticipation of the AFL-CIO Resolution, Senator Orrin Hatch (R-UT) and Representative Dave Camp (R-MI) sent a letter to the Obama Administration cautioning that any such pro-labor carve outs to the ACA would be ill-advised and unconstitutional. On Friday, in a letter responding to Senator Hatch and Congressman Camp, the Administration rejected the labor movement’s proposal and responded with the message that union-represented employees should be treated the same under the ACA as any other employee offered affordable coverage from his or her employer. According to the Administration’s letter, [t]he conclusion that an individual cannot benefit from both the exclusion from taxable income for employer-provided health coverage under such a plan and the premium tax credit provided by the ACA applies whether the individual is covered by a single-employer plan or a multi-employer Taft-Hartley plan.
It is unclear whether organized labor will respond with formal calls for repeal or amendment of the ACA, but with this issue of a potential double standard sought by labor unions currently behind them, employers should focus on future compliance obligations under the ACA. Such compliance obligations include the upcoming October 1 Marketplace notice deadline, the creation of the Marketplaces, the Individual Mandate taking effect in 2014, and the Employer Mandate and associated reporting requirements in 2015.