My Union, Right or Wrong

[Jeff In Milwaukee]

There’s been a lot posted on DU lately about Cadillac Plans, and it appears to be degenerating into a divide between a) either you support unions and oppose the excise tax, or b) you favor union-busting and support the excise tax. As with most false dichotomies, this one is leaving out a significant amount of grey area; and it causes people who genuinely support labor unions to accept the notion that a Cadillac Plan is good for the country and good for union workers.

Let’s talk about what causes differences in the costs of insurance plans. The most obvious is the quality of the coverage it supplies in the form of lower deductibles and co-payments. But according to a recent article in Health Affairs, only about 10% of the difference between the cost of these plans can be attributed to the value of the actual coverage that the insured receives. But there are other factors that effect price.

If you work in a high-risk occupation, such as being a police officer or firefighter, you might pay higher premiums because people in your line of work are more likely to be injured on the job. And then there’s age – if you work in an occupation where the demographics skew older, then it’s likely that your insurance coverage will cost more because you and your co-workers are more likely to get sick and require healthcare.

So while it’s true that some workers need higher-cost insurance plans because of their vocation or their age (two things that could be easily legislated out of any excise tax, by the way), the question remains as to why these plans are so expensive for workers who don’t fall into either category. If only 10% of the increased cost is due to actual benefits and if my cohort is no more likely to get sick or injured than anybody else, why am I paying Cadillac prices for Chevy coverage? The answer is a pretty obvious one: Somebody is making a killing off these plans. And that somebody would be the insurance companies that negotiate these deals with the labor unions.

And here is where I would like to touch the third rail.

Why would union leaders agree to purchase grossly over-priced insurance for their members? Let me restate that for certain unions, it makes sense to negotiate better coverage that accounts for hazards on the job and the hazards of old age, but for the others it would appears that the unions are being gouged something terrible for insurance coverage that is barely above average. Union leaders are not rubes – they have lawyers and consultants who assist in their negotiations with the insurance companies – so I’m at a loss to explain why they’re purchasing this coverage at all, much less defending it so passionately.

The excise tax is not perfect. It needs to create exemptions for coverage provided to older workers or workers in occupations that are designated as high-risk. And it needs to be indexed for inflation, so that coverage that is not subject to the excise tax today won’t be taxed in the future just because the price went up right along with the price of everything else. These fixes are relatively minor and would likely be acceptable to the members of the Democratic Majority – particularly since it’s a way to carve out a specific benefit directed toward a key constituent group.

But that being said, it would appear that insurance companies, assisted by either the negligence or the incompetence of union leadership, are making a killing by gouging workers on these insurance plans. The question, to my way of thinking, is why would we NOT impose a “Windfall Profits Tax” on the insurance companies? Based on the actuarial value of these plans, the insurers are committing something on the order of Highway Robbery. Why would we allow this to continue?

I think that in many cases, union members are getting a raw deal. In lieu of actual wages, they’re receiving insurance coverage that isn’t worth the price. A better solution would be to cap the costs of these plans and then renegotiate union contracts to put more money in the hands of the rank and file and less in the hands of the insurance companies. There’s been a suggestion to the effect that the excise tax should be delayed to allow the process of renegotiating contracts to be completed – possibly by 2011 or even 2012. I like that idea.

But if you’re asking me to choose between the excise tax and the union leaders, I’m afraid I’ll politely decline. The real question is whether the excise tax is good for union workers, and the answer to that one is a little more complicated.

[TwilightGardener]

1. You bring up good points. I too have often wondered just what the hell

people are getting for $23,000 worth of coverage. That is almost $2000 a month per employee--for what? While I don't want middle-class people hurt by this tax, I also think we should start capping this sort of cost, because it might be skewing ALL of our insurance prices upward.

[LiberalFighter]

2. Which union members are receiving family coverage that costs nearly $23,000 a year?

There have been no facts provided to support that union members receive health insurance that costs nearly $23,000 a year. Also, is it understood that union members do not all receive the same type of coverage or belong to the same local union?

A union member that works at Company A will not receive the same coverage as they would if they work at Company B. Even in the case of the autoworkers, GM, Ford, and Chrysler are negotiated separately. They try to negotiate the same benefits but there are differences. Health coverage has been an issue for several contracts and they have worked hard to keep as much of it as possible. That involves keeping the cost down.

A union member that works at a company that has just one or just a few locations wouldn't necessarily have the same type of coverage or pay the same premiums as others in the same category. If the pool of coverage is small the costs will be greater. In addition, what the employee pays for their share of the premiums as compared to what the employer pays may be different too.

Unless an employee pays the full cost of their insurance with no help from their employer they in all likelihood will not know the cost of their insurance.

[TwilightGardener]

3. Isn't the excise tax supposed to start at a value of $23,000 for family policies ($8500 individual)?

I was under the impression that the tax begins for the insurance co's on anything over those amounts. If it doesn't affect that many people, that is fine with me. I hope, as the OP says, that unions whose members will be affected by the tax will have an opportunity to renegotiate coverage and price.

[Jeff In Milwaukee]

6. Yes. They tax is on the amount above 8,500/23,000 (nt)

[LiberalFighter]

9. Read my other post regarding the problem with taxing "Cadillac Plans"

[Jeff In Milwaukee]

5. I have found none -- at least on DU

I keep looking for someone to step up, but I haven't seen it yet.

I honestly can't figure out how you spend more than $23K on insurance coverage. My own example: Between premiums I pay and what my employer pays, the annual cost is about $9,000. I have a $3,000 annual deductible and it covers dental, but not vision.

So if you eliminate my deductible and add vision coverage, I would estimate the cost of my family coverage to be about $15,000 per year. And that's assuming that my employer is paying all the cost.

Even taking into account the other potential factors that would effect cost, I'm at a loss to reasonably explain how the cost of any plan gets above $23,000 per year.

Until somebody can do the math to show me otherwise, I can't help but conclude that rank and file union workers are getting a bum deal on their health insurance coverage

[flyarm]

4. this excise tax is a tax on the middle class..not just unions..and by the time

the bill is fully in place it will encompass even more of the middle class.

Perhaps you should do some serious reading of how this bill will affect well over 31 million Americans..it is like a secret tax on the middle class.

There is nothing in this bill to bring down costs in Health care or meds..or to ensure we the people that any savings on corporations will be passed onto employees.

This is the greatest screwing of the middle class in my lifetime! And an absolute attempt at union busting.

Where Unions go ..American Labor goes.

If the Unions are busted..do you believe any American worker will see their standards of living sustained or get better??..It won't.

And let me educate you a little..the health care plans that Unions have..have been paid for ..in exchange for the labor of the workers in lieu of higher salaries negotiated in colective bargaining...but No one believes that money would come back to workers..

what will happen with this tax..Many employers will drop much of the "CARE" IN THEIR PLANS ..and we will all ..middle class and unions alike..see shit policies ..that leave the American worker with high deductables..and way less coverage..

I thought we democrats were fighting for 'HEALTH CARE REFORM" ..NOT INSURANCE, BIG PHARMA GIVE AWAYS.........AND MANDATED SHIT COVERAGE FOR THE MIDDLE CLASS........AM I WRONG?

[Jeff In Milwaukee]

7. Don't think you're paying attention...

I do taxes for a living and several of my clients are self-employed and self-insured. I haven't seen one of them, purchasing family coverage on the open market, that has a plan that costs anywhere close to $23,000 per year.

I have an employer-provide insurance plan for my family, and even if you amped up my coverage, I wouldn't be within shouting distance of $23,000 per year.

This isn't about busting unions. Just because these contracts are the results of collective bargaining doesn't mean that the workers got a good bargain. And if workers can negotiate for lower wages in return for this coverage, why can't they negotiate for higher wages in return for lower cost coverage. The door swings both ways.

And as I pointed out in the OP, the tax can easily be indexed for inflation so that if the plan isn't subject to the excise tax now, it won't be subject to the tax in the future.

[LiberalFighter]

8. Based on your post I would have to believe that you have had no real experience concerning unions.

First, labor unions for the most part do not purchase insurance for their members. Unless they are building trade unions the company arranges for the insurance. Building trade unions would need to purchase the coverage when their members don't work for a specific company.

Second, small companies cannot negotiate as if they are major companies.

Third, labor unions do everything they can to get the best wages and benefits for their members. That also means receiving those benefits at the best cost to the company and the members. Local unions utilize resources available from their district/regional and national offices. And companies do shop around to find the best deal that is available.

Fourth, it is not the labor unions or the companies fault that the insurance coverage is all screwed up. But taxing the insurance companies won't solve the problem. If anything, it would probably make it worse.

Fifth, how would implementing an excise tax on employee health care premiums reduce cost benefit the employee? If anything, their level of coverage would be reduce and/or their medical expenses would go up.

Sixth, how does one define what is a Cadillac Plan? What is considered extravagant health benefits?


The study you linked to does not connect the problem with labor unions or the companies.

It’s often assumed that high-cost health insurance plans—sometimes called "Cadillac" plans—provide rich benefits to plan subscribers. Health reform provisions that treat these plans like luxuries may be misguided. Only 3.7 percent of variation in the cost of family coverage can be explained by benefit design (actuarial value). Benefit design plus plan type (HMO, PPO, POS, or high-deductible plans) explains 6.1 percent of this variation. Industry type and medical costs in the region also play a role. Most variation in premiums, however, remains largely unexplained.

From the article "Cadillac Plan Tax Could Backfire, Study Suggest"

The relatively minor differences in deductibles, copays, out-of-pocket maximums and actuarial value of these plans suggests that there might have been major disparities in medical costs from one region to another. But, while large variations in Medicare costs have been exhaustively documented, this study found no positive correlation between the Medicare data and the variation in the cost of family coverage. This may be attributed, the researchers note, to the fact that health plans operate in a competitive market, while Medicare does not. Or providers may charge private plans and employers more or less, depending on how much they receive from Medicare. But no one really knows the reason, they point out.

What this means for the Senate reform debate is that, in the absence of more solid evidence, placing an excise tax on high-cost plans might not achieve the desired policy goals and could harm some people who now have fairly average–albeit high-priced–coverage. To avoid unintended consequences, it might be wise for the Senate to consider another source of funding.

The Problem with Taxing Cadillac Health Plans

As demonstrated in this paper, many factors influence spending, including age, gender, chronic conditions, and local pricing and practice patterns. These factors are largely beyond the control of individual employers and their employees.

This new tax could undermine the affordability of mainstream employer health benefits for those groups already facing the highest health care costs, including women, older Americans and those with chronic conditions.

[Jeff In Milwaukee]

11. OK....

Labor unions don't purchase insurance. Yes they do, and they do it all the time.

Small companies can't negotiate as if they were large companies. I never said they did -- didn't even mention it, in fact.

Labor unions do everything they can to get the best wages and benefits for their members. Read the history of the Laborers International Union and get back to me.

Not the labor unions or the insurance companies fault. Really? Then whose fault would it be? You and I enter into a business agreement and one of us gets screwed, somebody took advantage of somebody else, or somebody was being foolish.

Taxing insurance companies will lower benefits or increase costs. It might, but since only 10% of the cost of these plans is attributable to the actual value of the coverage, it's just as likely that employees won't feel any significant effects because they've been overcharged all along.

How do you define a Cadillac Plan? One that provides a small actuarial benefit to the insured at a highly inflated price.

I'm not quibbling over those plans that REALLY DO provide $23,000 in benefits. I'm talking about those where workers are paying an exorbitant amount for a neglible increase in value. If we've got an insurance company offering Chevrolet coverage at a Cadillac price, it would indicate that the consumer is getting ripped off. Why would anybody be inclined to allow that to continue?

[LiberalFighter]

20. Sure labor unions purchase insurance. Fire, property, etc

but as a rule they do not buy health care insurance for their members. The only exception would be the building trades and that is because their members do not work for any one specific company. The only time that a labor union would pay for health care insurance would be for anyone they hire to staff the office. But they are not employees of the company the union members work for.

There has been no evidence provided by you or anyone else that the cost of these negotiated benefits are exorbitant. I know that my union negotiated with the employer for the best coverage and also worked with them to find the best priced coverage. It was not done at the local or regional level. Our international union with their research and benefits staff does the necessary work.

Your definition of a Cadillac Plan does not nail down specifics. And when you can't nail down specifics your argument won't hold water.

If we really want to attack health care costs it requires reducing the administrative costs and profits of the insurance companies. When insurance companies operate with a 15 to 35% administrative and profit margin we will never see any useful changes. Single Payer is the only way to go which requires insurance companies not be allowed in the market.

The insurance plans that are likely to be less than useful compared to cost would be those plans that are provided by small companies.

[paulsby]

10. as a union member,i have long argued that unions are often wrong

just as management is. and gotten hammered for it.

unions are an ADVOCACY group. they are not supposed to be right, or to be advocating for ANYBODY's best interests but their members. sometimes, the best interest of the members (be they cops, firefighters, or teachers) runs CONTRARY to the people they serve (people in the community or students)

that's how advocacy groups are SUPPOSED to work.

i personally agree with my union that it is wrong to tax cadillac plans, but i certainly don't think unions are always right or that one should reflexively side with unions and against management.

many of the problems in law enforcement and in education system can be traced to unions. that's the reality. NOTHING is all good or all bad, and unions are no different.

i've said this many times, and every time i have, i get slammed as anti-labor. which is hilarious

[Jeff In Milwaukee]

12. I have the same problem myself...

Unions are supposed to represent their members' interest. Nobody else matters. With regard to police brutality compliants where the FOP adamantly defends an officer, I get really frustrated at their not acting "for the good of the public." But that's NOT their charter. As long as that cop is paying his dues, the union is supposed to do whatever it takes to defend him.

[paulsby]

19. exactly

it's similar to a defense attorney. a defense attorney MAY be arguing for justice (in that his client MAY be innocent), but as many defense attorneys have admitted, the VAST majority of their clients are guilty. that doesn't mean they shouldn't be zealous advocates for their client AND within the bounds of ethics (iow no suborning perjury, etc.) should at least try to get the case thrown out on a technicality, or "muddy the waters" such that if the facts are against the client, make emotional appeals, throw up smokescreens, etc.

my union doesn't always argue an officer is innocent. iow, when they know the bulk of evidence is Against the officer, they may just argue for a lenient punishment or whatnot, but they wouldn't be doing their job if they didn't advocate for the cop.

there are also systemic problems. for example, my union would fight ANY physical fitness requirement for cops. why? because it's an additional burden on their membership even though studies show fit cops are less likely to get hurt, less likely to get killed, less likely to use excessive force, less likely to incur civil liability, less likely to abuse sick leave, etc. it would CLEARLY be to the dept's benefit, the citizen's benefit, and even (in the long run) the individual cops benefit to mandate fitness. but it would mean cops would have to do "extra stuff" (iow workout), so the union would never go for it.

that's one example, of where a union's interests are CONTRARY to the public's interests.

and despite the protestations of many here, teachers unions are no different.

i am a STRONG supporter of unions, and my union. but i don't have a pollyanna view.

nice to hear SOMEBODY agrees with me :)

[dugaresa]

13. Having had "Cadillac Insurance" versus shitty insurance let me explain something

I am a professional, so is my spouse, and we are not union workers. I say this because taxing Cadillac plans will affect Unions and Non-Union workers alike.

Blue Cross Blue Shield PPO plan with prescripton benefits costs about $24K a year to insure a family.

When we last had such a plan we paid about $700/month and the employer covered the rest. It was a great benefit and was managed beautifully. All bills were paid for and I never had to do anything but go to the doctor and give them a card. It was lovely.

Due to job changes we lost that plan. We had to use my company's plan and last year that plan cost me $600/month out of pocket and it was horrible, high deductibles, loads of paperwork, and I had to spend a lot of my time tracking down stuff to make sure I wasn't being double charged.
I have no clue what that plan cost but it was shit.

This year I opted for the best of the worst options and my premiums are about $350/month but my deductible is higher and there are even more stipulations and special funds and all sorts of nonsense but I figured I had to get used to it because my company is doing away with traditional insurance next year.

I don't think getting good insurance under our shitty health care system in this country is a raw deal. Why? Because if you have a "Cadillac plan" and you are only clearing let us say $45K a year in wages it can protect you from bankruptcy over health issues.

Let us say someone making $45K a year had my shitty insurance but got an increase of $5K a year to off set the loss of good insurance they will find that the $5K will be eaten up due to shitty coverage. This is especially true for families. I have had to put a lot of money in flexible spending because I know that there are certain procedures and things that are a "given" for my family.

Now if we had universal coverage the Unions could just work towards better pay. But due to the lack of universal coverage the system really screws with the ability to negotiate higher salaries because it won't matter for squat if you end up with a high salary if your poor medical coverage impoverishes you.

I wish I could have a "Cadillac Plan" again because it was so much better and it would relieve me of the financial stress of my current shitty plan.

I am very much in favor of the Unions even though I am a professional non-union worker because Union gains typically have a positive ripple effect for even those of us that are in non union jobs.

[Jeff In Milwaukee]

14. You're the first person to set up...

and say that you have (had) a plan that cost more than $23,000 per year. Under the proposed excise tax, your insurance company would pay a $400 tax per year because the cost of the plan is considered excessive. Not the coverage, mind you. The cost.

As I said in the OP, only about 10% of the difference between your plan ($24,000) and, say, my plan ($15,000) can be attributed to the actual benefit you received. So why was your plan so damned expensive?

I think folks are missing the big point here. I'm not opposed to anybody -- hell, EVERYBODY -- having great coverage. The question here is whether the great coverage you're getting is actually worth what you're paying.

What I'm suggesting here is that perhaps you were paying $24,000 for a policy that was only worth $20,000 in actual benefits. And if that's the case, why wouldn't we want to tax the snot out of the insurance companies until they stop gouging consumers?

[dugaresa]

16. problem that I have is that the insurance company will figure out how to pass the cost on to the

consumer.

Personally having worked in that industry (medical billing), it is a mess and really needs an overhaul.

Technically insurance companies are just a "middle man" that increases the cost of services and adds not value aside from sucking money away from consumers and shorting the services end.

[Jeff In Milwaukee]

17. I absolutely agree about the role of insurance companies

Nobody ever got better because of an insurance policy. They get better because of doctors and nurses. When somebody keels over at the theater, nobody ever gets up and shouts, "Oh My God, Is There An Insurance Agent In The House?"

I'm intrigued by the idea of a national insurance exchange, where large employers and individuals can buy insurance under the same terms. While it would be better if a Public Option were in the mix, I'll be interested to see if plans can be regulated for cost, similar to the Public Utilities Commissions that operate in most states today.

[Xithras]

15. It's humorous to think they had any choice.

My current employer has very good insurance for the employees, negotiated by the union. The insurance company informed them this year that rates will be increasing by about 25% at our next renewal. This is a large account worth millions. When the insurance company was informed that we would be looking at new providers if they didn't lower the rates, the statement was met with a shrug. So, the local chapter leaders and the owners went in search of a new insurance company. You know what they found? We have three choices. We can either reduce our coverage levels (meaning more out of pocket expenses), pay at least 20% more than we're currently paying, or fire all of our sick and older employees to reduce our risk profile. Two are unpleasant. One is illegal.

Unions agreed to high priced plans because it's the only way they could get the coverage levels their members wanted. In the world of health insurance, there is no such thing as "cheap and good". You either pay out the ass for really good coverage, or you slash your premiums at the expense of coverage levels and increased copays. Anyone who thinks there's a middle ground hasn't tried to buy insurance in the last 20 years.

[Jeff In Milwaukee]

18. A huge problem....

Is that in most states, insurance companies operate on a near-monopoly status. The Senate Healthcare Bill wanted to establish state-based insurance exchanges, while the House wanted to create a national program.

I like the national program as it will foster more competition. Insurers can't just carve up the map and decide where they will be competetive and where they won't.

[Bluebear]

21. Well, that's quite a thread title, isn't it.