OLD Media Moves

Health care law hurts unions

August 6, 2013

Posted by Liz Hester

The new health care laws are putting pressure on unions and municipalities to trim prices in anticipation of higher costs down the line, according to a New York Times story:

 Cities and towns across the country are pushing municipal unions to accept cheaper health benefits in anticipation of a component of the Affordable Care Act that will tax expensive plans starting in 2018.

The so-called Cadillac tax was inserted into the Affordable Care Act at the advice of economists who argued that expensive health insurance with the employee bearing little cost made people insensitive to the cost of care. In public employment, though, where benefits are arrived at through bargaining with powerful unions, switching to cheaper plans will not be easy.

Cities including New York and Boston, and school districts from Westchester County, N.Y., to Orange County, Calif., are warning unions that if they cannot figure out how to rein in health care costs now, the price when the tax goes into effect will be steep, threatening raises and even jobs.

“Every municipality with a generous health care plan is doing the math on this,” said J. D. Piro, a health care lawyer at a human resources consultancy, Aon Hewitt.

But some prominent liberals express frustration at seeing the tax used against unions in negotiations.

The Associated Press (via the Washington Post) reported that some Democratic governors are concerned about putting the law in place:

Democratic governors say they are nervous about getting the new federal health care law implemented but add they will be better positioned in next year’s elections than many of their Republican counterparts who have resisted the far-reaching and politically polarizing measure.

Several of the 12 Democratic governors shared that sense of nervousness-veiled-by-optimism at the National Governors Association meeting Saturday in Milwaukee.

“There’s some angst, and you can see that from the decision the administration made a couple weeks ago,” said Delaware Gov. Jack Markell. “There’s a lot of work to do.”

By next Jan. 1, most people will be required to have insurance. States have to set up exchanges by Oct. 1, when uninsured individuals can start buying subsidized private health coverage that would go into effect Jan 1, and businesses with more than 50 employees working 30 or more hours a week were supposed to offer affordable health care to their workers or risk a series of escalating tax penalties.

But businesses said they needed more time, and on July 2, President Barack Obama’s administration abruptly extended the deadline one year — to Jan. 1, 2015.

That caused some Democrats in Congress to worry the program would not be ready on time, as states are building online platforms for their residents to use to comply with the law. Although the U.S. Supreme Court upheld the Affordable Care Act in June 2012, the Republican-controlled House has voted 40 times since Obama signed the law in 2010 to repeal, defund or scale it back, most recently Friday.

There are signs that the health care industry is struggling as well. MarketWatch reported that hiring is slowing:

Health-care providers are under more pressure in 2013 to freeze or reduce the number of employees, partly because of new federal regulations, according to survey of executives at U.S. service companies.

Critics of “Obamacare” have long warned the health-care law would cause businesses to hire fewer employees or shift to more part-time work to save money. And anecdotal evidence suggests it’s already happening at smaller companies.

One industry to watch carefully is health care itself, it turns out. “Sequestration and health-care reform causing uncertainty and lower revenues,” an executive at a health care and social assistance provider told the Institute for Supply Management in July.  “Lower revenue due to health-care reform, causing pressure to cut costs and headcount,” an industry executive said in June.

Similar comments were reported by ISM in its reports for January, April and May. Health-care executives have reportedly cut jobs in four of the first seven months of 2013, according to the ISM survey.

Official U.S. employment data do not show an outright decline in health-care jobs, but current hiring trends are on track to be the lowest since 1990, the first year for which government records are available. From January to July, health care added an average of 15,700 jobs a month, according to the Labor Department.

The pressure to lower costs across the board impacts cities, businesses, and the industry itself. What isn’t apparent from these stories is if any of the attempts to cut costs will be passed to consumers. Either way there’s a lot to write about as people shift through implementing the law.

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