Unions Exert Pressure on Health Care Reform

Published November 10, 2009

Labor union lobbying is playing a key role in the national debate about health care reform, as unions seek to protect the expensive, full-coverage plans many have negotiated with employers.

Union leaders have pressured Congress to pass a massive expansion of the federal government’s role in health coverage. Yet unions oppose efforts to fund that expansion through taxes on high-value, or “gold-plated,” insurance plans.

The current health care framework designed by Sen. Max Baucus (D-MT) includes a 40 percent tax on health insurance benefits of more than $8,000 per year for an individual or $21,000 for a family of four—which would cover nearly all union-negotiated plans and include more people over time.

Robert Laszewski, president of the consulting firm Health Policy and Strategy in Alexandria, Virginia, notes the Baucus plan calls for a “Consumer Price Index (CPI) + 1” increase in the amount of benefits that would trigger the tax. Since health care costs historically have increased at several percentage points greater than the CPI, the tax would apply to increasing numbers of people every year.

According to Laszewski, the Congressional Budget Office estimates the revenue from the tax will be $5 billion in 2013 but increase to $53 billion by 2019.

“That’s a tenfold increase,” Laszewski said. “It’s a tax trap, like the Alternative Minimum Tax.”

Two Things Unions Want

James Sherk, a health policy expert with The Heritage Foundation in Washington, DC, believes unions primarily want two things from health insurance reform.

“The first is that unions who organize health care workers want to organize the health care sector,” Sherk said. “The more government involvement in the health care industry, the easier that task will be.”

“We see mechanisms in the various bill drafts to drive increased union membership in the medical field,” said Greg Mourad, legislative director for the National Right to Work Committee in Washington, DC. He believes union carve-outs protecting their health plans from taxation will drive employees in the wider economy into unions.

“The second thing they want,” Sherk continued, “is for everyone to have the same cost structure. Union companies are at a competitive disadvantage with nonunion companies.”

Union Health Plans Exemption

Laszewski doubts Congress will ultimately pass any tax on high-cost health plans.

“It cuts right at union plans. The Democratic Party has been very careful to protect union interests since President Obama was elected,” Laszewski said.

As an example, Laszewski notes that in normal bankruptcy proceedings, labor obligations are given very low priority, but in the recent Chrysler bankruptcy, Congress went out of its way to put union interests ahead of the bondholders’ interests.

Mourad believes if unions can get an exception in the legislation, they would support taxing high-value plans for others.

“Sen. Baucus has stated that he supports a carve-out for unions,” Mourad said, “Only nonunion taxpayers would be affected.”

Loren Heal ([email protected]) writes from Neoga, Illinois.