Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
Since it was signed into law in 2010, the Patient Protection and Affordable Care Act (ACA) has survived a constitutional challenge before the Supreme Court and 37 attempts by congressional Republicans to kill it. Now, as the deadline for implementation of the legislation looms, "Obamacare" faces another hurdle: making the ambitious, byzantine plan actually work.
By October 1, the Obama administration must have the people and procedures in place to administer the vast new program mandated by the ACA. That could turn into a "train wreck," warns Sen. Max Baucus (D-Mont.) - who, as chair of one of the committees writing the legislation, made a wreck hard to avoid. The plan then needs to sign up as many of the 49 million uninsured Americans as quickly as possible, especially the young and healthy, to make the new system financially viable.
Even if the agencies involved clear the initial hurdle of enrollment, a host of other problems loom. Fundamentally, the ACA could fall short of its goal of providing better and more affordable healthcare for most Americans. And at the same time that the new plan provides insurance for millions of uninsured Americans, for many others its implementation could spell trouble: slashed work hours, a proliferation of burdensome insurance plans with expensive deductibles, and the dissolution of the multi-employer health plans that provide stable insurance to many union members.
Obstacles to Obamacare's successful launch stem from five sources: how Congress wrote the law, continued Republican sabotage attempts, employers using the law's provisions to cut costs (and hurt workers), the regulations the federal government is writing to implement it, and concessions the administration made to opponents. Republicans have stridently opposed Obamacare, and employers have focused on maximizing their own advantage, but even some stalwart defenders - especially labor unions - are now criticizing the implementation of the ACA as falling far short of its limited promise.
Holes in the safety net
The effort to string together a healthcare program around existing insurance coverage has resulted in a safety net full of gaping holes. The ACA could have provided much better insurance if it had included a public option, as progressives advocated. Even so, many of the glitches in the law could be fixed under normal political circumstances, but today Democrats do not dare introduce revisions when most Republicans would seize any opportunity to kill the ACA.
Consider how the law deals with affordability.
The ACA requires businesses with 50 or more employees to offer "affordable" insurance to anyone working 30 or more hours per week - which must cost no more than 9.5 percent of the worker's household income. In addition, businesses must also provide insurance for dependents, though potentially at an additional cost to the employee.
Employers who fail to provide any insurance will have to pay a fine of $2,000 a year for each qualified employee (beyond the first 30). If they provide insurance that is not "affordable," they pay a fine of $3,000 a year for each employee who then obtains subsidized insurance from the exchange. (Under the ACA, workers who decline their employers policy as unaffordable must buy other insurance or pay a penalty.)
The problem is the definition of "affordable." A median middle-class family of four with private insurance earns about $81,000 a year and spends 9 percent of its income on premiums, co-pays and deductibles, according to the White House Task Force on Middle- Class Working Families. This means that, under the ACA, a workers policy could be deemed affordable despite costing more than her current family policy.
More insidiously, the 9.5 percent threshold applies only to the price of the individual workers insurance. Insuring children or other dependents could raise the cost far beyond 9.5 percent. This would make the so-called affordable plan untenable for some families. And that could become a big problem. If the worker rejects this plan as too expensive, he will be ineligible for the subsidies for children's insurance through the new ACA state insurance marketplaces. (Some children in poor families might get insurance through the existing state Children's Health Insurance Programs, even if their parents opt out of their employers' plans.)
Similarly complicated rules apply to spouses, but that story starts differently: Employers do not have to offer spousal insurance, but if they do, the spouse cannot receive subsidized insurance on the state marketplace.
The net effect? With the ACA, a family of modest means could gain, on paper, affordable access to health insurance, yet be unable to afford it.
Even with the ACA's shortcomings, if it is implemented as written, millions of people without health insurance - from those with low to moderate incomes who can't afford insurance to others with pre-existing illnesses that insurance companies will not cover - would stand to gain more affordable healthcare. But continued Republican efforts to sabotage the law, largely for political purposes, will greatly narrow the ACA's benefits.
The ACA will expand Medicaid to cover all individuals and families with incomes up to 138 percent of the poverty line. That could cover 21.3 million U.S. citizens who now lack insurance. (Adjusting for the poorer health of its clients, Medicaid is more efficient and comprehensive than private alternatives, according to the Urban Institute.) But Republicans who want the ACA to fail have seized upon a Supreme Court ruling that allows states to opt out of this expansion of Medicaid.
In a spiteful act that Steve Kreis - berg, a health expert with the public employee union AFSCME, calls "pure political theater," governors or legislatures in some 20 states are likely to block this expansion for as many as 9 million needy Americans. And they are doing so even though the federal government has agreed to pay the full cost for the first three years and a gradually declining share thereafter, leveling off at 90 percent in 2020.
After failing to push for the ACA to include a Medicare-like public option (let alone consider a more rational single-payer solution), the Obama administration continues to retreat on the public role of health insurance. It recently allowed Arkansas to privatize the operation of its expanded Medicaid. In a similar retreat, unrelated to the ACA, the administration increased its subsidies to give a $71.5 billion windfall over a decade to the for-profit Medicare Advantage plans, even though candidate Obama pledged to cut these subsidies as wasteful spending.
Ever since union collective bargaining during and after World War II made employers the primary providers of health insurance in the United States, businesses have been of two minds about their role. Some think good benefit plans help to retain excellent employees, but most want to minimize or eliminate the cost of employee health insurance. And, under the ACA, many analysts expect some businesses to drop the insurance they now offer and simply pay a fine if that proves cheaper.
Small businesses (with fewer than 50 employees), as well as qualified individuals, can buy insurance through the ACA mandated exchanges and receive subsidies. If employers paid workers higher wages in place of providing insurance (an unlikely scenario), some of those workers might even fare better buying the subsidized insurance.
But it appears certain there will be employers who both exploit quirks of the law and continue their existing strategy of shifting the cost of healthcare to their employees (or the public) whenever possible.
Employers have several ways to game the system set up by the ACA. First, if paying the federal government fine costs less than paying for employee insurance, corporations may opt to pay the penalty instead of provide insurance. Although only 5.4 percent of employers took the penalty option in 2011 instead of offering employees insurance under Massachusetts' "Romneycare," the model for the ACA, the political climate in the state is more supportive of nearuniversal health insurance than in most states. Romneycare, after all, was based on conservative proposals and introduced by a finance-sector executiveturned-politician. ModernHealthCare. com reported in February that, according to a survey, only 6 percent of a group of large to moderate-sized corporations said they planned to stop providing insurance over the next three to five years (and presumably pay the penalty). But if some businesses gain an advantage by dropping insurance, their competitors are likely to quickly follow.
Second, many employers- such as the Regal Entertainment Group movie theaters, Sutter Hospitals, the city of Long Beach, Calif., and the government of Virginia- have already taken steps to restrict some employees to fewer than 30 hours a week to avoid offering ACA-mandated insurance for full- and three-quarter-time employees. The Berkeley Center for Labor Research and Education projects that industries employing workers at slightly more than 30 hours a week are most likely to cut hours. These industries include restaurants, accommodations, nursing homes, building services, retail, healthcare and varied services. Most of the 2.3 million workers who the center estimates will suffer cutbacks in hours also earn low wages.
But it is colleges and universities that have so far clamped down most aggressively, focusing on the ill-paid adjuncts who teach roughly half of all higher education classes nationally. Lindsey Hewitt, an adjunct lecturer at Oakton (Illinois) Community College, estimates she could lose half her modest income if Oakton pursues its plan to reduce her course load to the equivalent of fewer than 30 hours a week. In February, administrators told department chairs that they should restrict adjuncts to teaching two classes next fall (half of what many previously taught).
Both adjuncts and full-time faculty - each of whom is organized in separate National Education Association locals - fought back at college governance meetings, and the administration and unions reached a tentative compromise to create a new category of adjuncts eligible for both longer hours and insurance. But many adjuncts will still end up with neither. "The whole patchwork was put together to use extremely low-paid labor and transfer costs to individuals and the public," says Hollace Graff, co-chair of humanities and philosophy at Oakton.
Now protests are erupting across the country, reports long-time contingent faculty organizer Joe Berry, led by the various teacher unions and the broadbased New Faculty Movement (see "Mad Professors" on page 12).
Many big private employers appear poised to restrict work hours as well - if there's no backlash. In response to hostile publicity, Darden Corporation, operator of the Olive Garden and Red Lobster restaurants, has (for now) backed off from its plan to limit hours, but other companies are likely to endure criticism or act surreptitiously.
"Nobody wants to be the first employer to do it, but everybody wants to be second," says Ida Hellander, director of Physicians for a National Health Program.
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 60 percent of expenses. 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 its 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 cant 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 TaftHartley 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 multiemployer 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 forprofit 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), nonunion 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 administrations 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 chains 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 the ACA presents potential problems and polls show lukewarm support for Obamacare, outright repeal is popular. A majority of Americans do like some of the more straightforward ACA provisions, such as offering birth control and other preventive care no cost, letting children up to 26 years old be included on their parents' ance policies, banning on the basis of pre-existing capping annual out-of-pocket and prohibiting insurance from setting either annual or limits on payments for medical care.
And despite the criticism - warranted and not- Obamacare will millions of Americans, insured uninsured, and particularly lowworkers - many of whom now can't ford 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 Rights 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 Programs 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 muchneeded next step.
UNION MEMBERS: Will you get caught in the red tape?
ARE YOU IN A UNION?
DO YOU GET INSURANCE THROUGH A TAFTHARTLEY FUND?
Because Taft-Hartley funds won't be eligible for certain ACA subsidies, the funds are likely to be undercut by employer plans. The result? Your high-quality, comprehensive union insurance, which covers you even when you're out of work, could either weaken or disappear.
Supporters of national healthcare march during an Occupy Wall Street protest on Oct. 26. 2011.
EMPLOYERS WILL BE TEMPTED TO USEACA GUIDEUNES AS AN EXCUSE TO SHIFT AS MUCHAS 30 PERCENT OF CURRENT HEALTHCARE INSURANCE COSTS FROM THE COMPANY TO THE EMPLOYEE.
PARENTS: Will you get caught in the red tape?
DO YOU HAVE ONE OR MORE DEPENDENTS?
DOES YOUR COMPANY HAVE 50 OR MORE EMPLOYEES?
ARE YOUR FAMILY EARNINGS BETWEEN 250% AND 400% OF THE POVERTY LINE (BETWEEN $58,875 AND $94,200 FOR A FAMILY OF FOUR)?
The ACA considers an employer's insurance plan "affordable" if it costs you no more than 9.5 percent of your household income. But that's just to cover you-insurance for your dependents could cost roughly three times what your individual policy does (and your spouse isn't guaranteed coveragß at all). If you turn down your employer's insurance for your dependents, however, you'll be ineligible for subsidies on the public insurance marketplace.
PART-TIME WORKERS: Will you get caught in the red tape?
DO YOU WORK LESS THAN FULLTIME BUT MORE THAN 30 HOURS A WEEK?
DOES YOUR EMPLOYER HAVE 50 OR MORE WORKERS?
DOES YOUR EMPLOYER NOT INSURE YOU?
Your employer may reduce your hours to evade theACA's mandate to provide health insurance to workers who put in 30 hours a week or more. You still won't be insured, and you'll have less income to boot.
DAVID MOBERG, an In These Times senior editor, has been on the magazines staff since it was founded in 1976.