The Irony of ObamaCare: Making Inequality Worse
UNITE HERE, March 7, 2014
The promise of Obamacare was the right one and the hope for extending healthcare coverage to the un- and under-insured a step in the right direction. Yet the unintended consequences will hit the average, hard-working American where it hurts: in the wallet. Currently a national dialogue is emerging by all political parties on the issue of income inequality. That is a debate worth having. The White House and Congressional Democrats are “resetting” the domestic agenda following the negative fallout from the rollout of the ACA. They plan to shift focus from health care to bread and butter issues of income inequality that have eroded the American paycheck for decades.
Ironically, the Administration’s own signature healthcare victory poses one of the most immediate challenges to redressing inequality. Yes, the Affordable Care Act will help many more Americans gain some health insurance coverage, a significant step forward for equality. At the same time, without smart fixes, the ACA threatens the middle class with higher premiums, loss of hours, and a shift to part-time work and less comprehensive coverage.
* Transferring A Trillion Dollars in Wealth: Most of the ACA’s $965 billion in subsidies will go directly to commercial insurance companies, one of the largest transfers of public wealth to private hands ever. Since the ACA passed, the average stock price of the big for-profit health insurers doubled, their top executives were paid more than a half billion dollars in cash and stock options, and in the past 2 years, the top 10 insurers have spent $25 billion on mergers and acquisitions.
* Strangling Fair Competition: Before reform, different types of health plans were regulated under different bodies of law. The Obama Administration has blocked many non-profit health funds from competing for the law’s proposed trillion dollars in subsidies by refusing to set fair regulations for different types of plans. The unbalanced playing field will give employers of people covered by these plans powerful incentives to drop coverage.
* Moving to Part Time Work: The Administration’s experts say employers won’t follow the incentives and drop coverage. But they also told the nation that employers would not cut workers’ hours to get below the 30-hour per week threshold for “full time” work, even as 388 employers announced hours cuts since early 2012.
* Cutting People’s Pay: If employers follow the incentives in the law, they will push families onto the exchanges to buy coverage. This will force low-wage service industry employees to spend $2.00, $3.00 or even $5.00 an hour of their pay to buy similar coverage.
For two years, labor unions and employer partners have patiently explained to the Obama Administration and Congress the potential damage that the ACA poses to these unique, successful non-profit health plans.
Having already made efforts to accommodate businesses, churches and congressional staff, it is ironic that the Administration is now highlighting issues of economic inequality without acting to preserve health plans that have been achieving the goals of the ACA for decades. Without a smart fix, the ACA will heighten the inequality that the Administration seeks to reduce.
We take seriously the promise that “if you like your health plan, you can keep it. Period.” UNITE HERE members like their health plans. UNITE HERE’s plans are ready to compete with the corporate giants of the health insurance industry if Washington will simply create a level playing field.
By Don McCanne
UNITE HERE is a union of service workers in hotels and other industries. Many of their members are insured through non-profit Taft-Hartley plans with joint union-management governance structures. This report shows how the Affordable Care Act can have a negative impact on the health care coverage and hours of employment of union members, in effect making inequality worse.
Some of their legitimate complaints:
* Employers are not required to make available health insurance to employees who work less than 30 hours per week. Although the Obama administration denies that this will cause employers to reduce the hours that many of their employees work, it is already happening. Obviously that reduces the employees’ net incomes and may disqualify them from receiving insurance coverage.
* Employers do not have to provide any health coverage at all if they do not have more than 50 employees. Many employers are taking measures to stay below the 50 full-time employee threshold.
* Employer penalties for not providing coverage are far smaller than the employer costs of their health benefit programs. It is likely that many employers will elect to pay the penalties rather than support a health plan. Yet it is unlikely that employers will increase wages enough to compensate for the lack of an employee health benefit program.
* Most UNITE HERE union members have wages low enough to qualify for subsidies to help pay for plans obtained through the state or federal insurance exchanges. Yet those subsidies cannot be used for employees in the UNITE HERE Taft-Hartley plans. (They do indirectly receive the tax benefit of deductibility for employer-sponsored plans, but at their income levels, this benefit may be negligible.)
* More expensive plans will be subject to a 40 percent excise tax. The UNITE HERE Taft-Hartley plans may be subject to this tax, not because the benefits are too generous, but rather because health care costs are so high and because many of the employees in the service industry union are older with greater health care costs. This excise tax is borne by the employee through higher premiums and forgone wage increases.
* All plans, including Taft-Hartley plans, pay taxes that are used to ease the financial transition of private plans offered on the exchanges. Though the union members ultimately pay these taxes, they receive none of the benefits since Taft-Hartley plans do not qualify for transitional financial support.
* Self-funded plans, such as these Taft-Hartley plans, are prohibited from being offered to the public and thus cannot benefit from market competition as the exchange plans can.
* ACA generously subsidizes private health plans with some of those funds going to overpaid executives and wealthy shareholders, thereby contributing to worsening inequality.
Although UNITE HERE calls for Congress and the president to level the playing field through legislation and rule making, a far better solution would be to establish a single payer national health program.
Under an improved Medicare for all, UNITE HERE union members would receive more generous benefits, with first dollar coverage, and with a net cost to them in taxes that would be significantly less than what they are currently paying in premiums and forgone wages. A single payer system would be more effective in reducing inequality than would tweaking the Taft-Hartley plans.