Features » June 17, 2013
How Obamacare Could Flatline (cont’d)
As the costs of healthcare and insurance have risen, employers have shifted more of the burden to their employees, who now pay higher shares of insurance premiums, co-pays and deductibles, and receive reduced coverage. Some corporations, such as Wal-Mart, rather than offer affordable insurance, have encouraged their low-wage employees to rely on Medicaid and other publicly subsidized programs.
“The essential trend of cost-shifting to workers is exacerbated by the ACA,” says National Nurses United director of public policy Michael Lighty. For example, the famous “Cadillac tax” on high-priced insurance plans will help finance the new legislation, but according to the Congressional Budget Office, it primarily shifts costs to employees. And contrary to advocates of free-market healthcare, dumping more expenses on individuals will not make healthcare more efficient and certainly will not improve health.
More importantly, the ACA sets up four tiers of coverage—bronze, silver, gold and platinum—that would pay for, respectively, 60, 70, 80 and 90 percent of anticipated healthcare costs. Employers must provide at least the bronze-level insurance, which covers 60percentofexpenses.Meanwhile,the silver, 70-percent policy serves as the benchmark for defining how much of a subsidy people will receive for obtaining insurance on the exchange.
Today, the average policy covers 82 percent of costs, while the best union plans cover 90 percent. Employers will be tempted to take ACA guidelines as effectively making the bronze or, at best, silver policies the new insurance standard. That alone could shift as much as 30 percent of current healthcare costs from insurance companies to individuals, potentially causing a political revolt among those so affected.
Late in negotiations over the text of the bill, Republicans insisted that all exchanges offer a high-deductible plan, sometimes known as a catastrophic plan or consumer-directed health plan. Employers like this option because it’s cheap. Younger, healthier or wealthier employees may go for it because such plans typically provide a Health Savings Account that grows in value if the insured person needs little healthcare. Last year, 70 percent of major employers surveyed offered a high-deductible alternative, according to consultants Towers Watson and the National Business Group on Health, and 20 percent said they would offer it alone this year. Advocates say the high-deductible plans turn people into careful consumers, putting markets to work to improve health while cutting costs.
But a large body of research, including recent studies by the UCLA Center for Health Policy Research and by Economic Policy Institute economist Elise Gould, challenges those claims. High upfront costs, typically for the first $3,000 in medical expenses, make people delay or avoid needed treatment. Often people do not even take advantage of free preventive measures or tests, since they may not realize the procedures cost nothing or fear the expense of treating a condition that a test might reveal.
Delayed treatment causes more health problems and financial risk later on. Ultimately, such plans do not save money for the healthcare system or improve health. Even worse, high-deductible plans impose a disproportionate burden on poorer patients, for whom the upfront, out-of-pocket expenses pose the greatest challenge. What’s more, care of the 5 percent of the population who are very sick consumes half the nation’s health spending, and most of that huge expense occurs long after the patient has paid his high deductible charge.
Earlier this year, Providence Health & Services, a nonprofit hospital and healthcare system in five northwestern states, began imposing a high-deductible plan on its employees. More than 700 workers in Olympia, Wash., members of SEIU Healthcare 1199NW, went on strike for five days in March and filed unfair labor practice charges against Providence for trying to change the contract without negotiations.
Under the new high-deductible policy, Providence housekeeper Deborah Tipton says that she can’t get the ultrasound scans she needs after thyroid cancer surgery. “I haven’t gone to a doctor,” she says. “I can’t afford it. I can’t even imagine how much an ultrasound would cost, and I don’t want to go. There will just be a big bill I can’t afford. I literally live paycheck to paycheck. They say [the new insurance] is affordable, and I say, ‘If I had your salary, it might be affordable.’ ”
Most unions backed President Obama’s health reform, even though it meant deferring key matters like labor law reform. So Kinsey Robinson, president of the small—25,000-member—United Union of Roofers, Waterproofers and Allied Workers raised eyebrows in April when he called for reform or repeal of the ACA. Then in May, other union leaders, including United Food and Commercial Workers (UFCW) President Joseph Hansen and UNITE HERE President D. Taylor, publicly expressed the criticisms that union officials have grumbled about privately for months.
Beyond the concern of Hansen, Taylor and others that employers will cut workers’ hours to evade their insurance responsibilities, union leaders are especially unhappy with how the ACA has dealt with the health insurance programs known as multi-employer—or Taft-Hartley—funds. The 1947 Taft-Hartley law authorizing these funds aimed to help highly mobile or cyclical workers who might move among small unionized firms in industries such as construction, hotels and trucking. Jointly managed by unions and businesses, the funds provide insurance tailored to the needs of nearly 26 million participants. Many funds combine active, injured, unemployed and retired workers from the industry. The funds enable workers to avoid “churning” through changing insurance arrangements in unstable industries—the very problem that will plague many workers under the ACA’s tangled rules and diverse qualifying thresholds.
Despite Obama’s pledge that anyone could keep existing insurance, the funds feel threatened by the ACA, and the unions warn that their members may not be able to keep the insurance they now have and like.
Under regulations the administration has written, the nonprofit multi-employer funds will be prohibited from purchasing subsidized insurance through the exchanges. They will also pay a tax on each policy to help pay for the subsidies offered on the exchange. However, individuals or small for-profit businesses, especially from lower-wage occupations, could buy subsidized insurance through the new marketplaces. By obtaining insurance more cheaply than the multi-employer plans can (thanks to Obamacare), non-union businesses would gain a competitive edge over unionized firms—and unionized businesses or individual workers would have incentives to leave the fund and obtain insurance. So the union loses one of the main benefits it offers members, and workers lose a steady source of high-quality insurance when their employment is uneven.
Although the ACA includes nothing that protects the multi-employer funds, unions and fund representatives argue that these funds should count as a “qualified health plan” and be allowed to purchase subsidized insurance in the state marketplaces. So far the Obama administration’s federal rule makers have rejected the funds’ argument. For its part, the AFL-CIO has refused to make any public comment on such problems, reflecting the political sensitivity of White House allies levying criticism of Obamacare, no matter how legitimate. Increasingly, these issues will complicate collective bargaining, as they did in UFCW negotiations with the Stop & Shop grocery chain in the Northeast this spring over continuation of insurance for many of the chain’s thousands of part-time workers. In the end, the contract provided a large fraction of the part-timers continued insurance under the traditional Taft-Hartley plan, but it left many to find coverage under ACA provisions.
The ACA has also complicated UFCW’s ongoing negotiations in Indianapolis and Cincinnati with Kroger, whose CEO David Dillon told the Financial Times that the company might drop insurance for full-time workers—now provided through a Taft-Hartley fund—if it costs much more than the cost of a federal fine. In addition to restricting hours of part-time workers, corporate bargainers have also talked about dropping spousal insurance.
In another twist, some unions may also find that large blocs of their members, especially those earning low wages, may pay less for insurance through the state marketplaces than through their existing union contract.
The political fallout
Unions and progressives have a tricky line to walk over how much to defend Obamacare for its good intentions and accomplishments versus how strongly to criticize its shortcomings in pursuit of robust, public social insurance. In the short run, any criticism of the ACA will feed into the current partisan showdown. The problems with implementation will undoubtedly become potential political chits for Republicans to cash in upcoming national elections. Republicans hope to guarantee their victory by running against Obamacare and by blocking Democrats at every turn from delivering on their promises to reform healthcare. If Republicans win, their healthcare alternative is the repeal of the ACA, followed by policies that weaken even pre-Obama protections, such as turning Medicaid into block grants to states and promoting individual high-deductible insurance.
But the Republican calculation may be off the mark. Though the rollout of the ACA presents potential problems and polls show lukewarm support for Obamacare, outright repeal is not popular. A majority of Americans do like some of the more straightforward ACA provisions, such as offering birth control and other preventive care at no cost, letting children up to 26 years old be included on their parents’ insurance policies, banning discrimination on the basis of pre-existing conditions, capping annual out-of-pocket costs, and prohibiting insurance companies from setting either annual or lifetime limits on payments for medical care.
And despite the criticism—warranted and not—Obamacare will help millions of Americans, insured and uninsured, and particularly low-wage workers—many of whom now can’t afford health insurance even when it is offered. By requiring employers to offer affordable insurance to most of the workforce, the ACA will expand access to healthcare and somewhat level the playing field among businesses, eliminating much of a cost-cutting incentive to not provide any insurance. That should help unions stay competitive while offering good benefits—with the important exception of the existing multi-employer plans described above. The ACA also creates a safety net for workers who lose work or are employed cyclically.
The complex mix of the ACA’s accomplishments and flaws guarantees that political fights over the plan and the provision of healthcare more generally will not end soon. In contrast to programs like Social Security, Medicare and Medicaid—which quickly became bedrocks of American public policy, despite the Right’s dreams of undoing them—Obamacare is an unstable, unsustainable compromise. Most likely, it will set the stage for moves either to the Right, with more corporate and market domination and less support for individuals, or to the Left, with a more straightforward social insurance through a government single-payer plan.
In the meantime, as the ACA’s problems materialize, the challenge for the Left is to move the country beyond Obamacare. “The strategy of the Right is to blame [shortcomings] on government, but there will also be lots of anger towards the insurance industry,” says Physicians for a National Health Program’s Hellander. “The key is to be clear that the problems are real, but they were created by private industry, not the government.” And, to tweak Ronald Reagan’s maxim, government in this case is the solution. The solution could emerge state by state, building most simply and effectively into an improved, more comprehensive version of Medicare for everyone. That may not solve all of America’s healthcare problems, but it would be a giant and much-needed next step.
David Moberg, a senior editor of In These Times, has been on the staff of the magazine since it began publishing in 1976. Before joining In These Times, he completed his work for a Ph.D. in anthropology at the University of Chicago and worked for Newsweek. He has received fellowships from the John D. and Catherine T. MacArthur Foundation and the Nation Institute for research on the new global economy. He can be reached at email@example.com.