By: Ronald J. Kramer, Esq.
Some of the biggest opponents of the Affordable Care Act (“ACA”) may end up being unions. Tthe AFL-CIO recently passed Resolution 54, which expressed its concern over the possible negative impacts the ACA as written and interpreted will have on multiemployer plans. For example, among other changes, the AFL-CIO has asked that collectively bargained plans be exempt from the Cadillac tax, reinsurance and other fees which they believe will drive up the cost of collective bargained plans to “unsupportable levels,” resulting in pressure to “shift costs to workers, cut wages, and to agree to unacceptable high deductible plans.”
Critically, the resolution also called on the federal government to provide multiemployer funds with access to the ACA’s premium tax credits and cost-sharing reductions on behalf of working families. As it stands, participants of multiemployer funds are not eligible to receive the subsidies persons who purchase insurance on exchanges are eligible for if their employer does not provide affordable minimal coverage and if their household income is no more than 400% of the federal poverty level.
Unions are concerned that this creates a disincentive for fund participation. Indeed, in some lower income industries employers and unions might determine employees and their employers would be better off economically if employees were not offered affordable minimal coverage and instead were permitted to obtain subsidized insurance on an exchange. While the employer would be faced with a shared responsibility penalty, that cost might be offset by the value of having “Uncle Sam” pick up a large portion of employee insurance costs.
Unions, multiemployer funds, and many employers whose employees participate in those funds have been pressing the Obama Administration for some time on this issue. Concerns over the possible extension of federal subsidies to multiemployer fund participants led Senator Orrin Hatch, the ranking Republican member of the Senate Finance Committee and Congressman David Camp, the Chairman of the House Ways and Means Committee to send a letter to the Secretary of the Treasury on September 10, 2013, asserting that any attempt to provide exchange subsidies to persons covered by employer-sponsored insurance would be “illegal.”
Before the ink on Resolution 54 was even dry, however, the Treasury Department on Friday September 13, 2013, quashed the idea of any subsidy exceptions being made for multiemployer funds. In a response letter sent to Senator Orrin Hatch the Treasury Department reiterated that participants in multiemployer funds are not eligible for subsidized health insurance.
Absent an amendment to the ACA, which is highly unlikely, it does not appear that multiemployer fund participants will be eligible for subsidies on the exchange. What is unclear from the letter, however, is whether the government will allow multiemployer funds to engage in some sort of work-around, such as by adopting the “two trust model” being floated by some groups. Very generally speaking, under the two trust model, multiemployer plans would send subsidy-eligible participants to the exchanges for their primary medical coverage. The new trust would pay for the employee’s share of the insurance on the exchange, and also cover any employer shared responsibility penalties. The multiemployer plan would provide certain additional services and supplemental benefits to the participant. Notably though, the two trust model still faces a number of legal and practical issues. Further, this approach still “splits” the multiemployer plan’s risk pool and does not give the plan direct access to the tax credits provided under the law. Stay tuned for further developments on alternatives.