On June 25, the U.S. Supreme Court upheld the Affordable Care Act (also known as “Obamacare”) in a 6-3 decision written by Chief Justice John Roberts. Legal analysis seemed to take a back seat to practicalities – primarily, concern about the chaos that might ensue if the law were stricken down at this late date. The majority essentially found that the four-word phrase “established by the State” meant “established by the state and the federal government.” Apparently, the majority found that the law needed to be saved if it was to be a law and that it couldn’t survive if interpreted as written. In dissent, Justice Antonin Scalia blasted the majority for its “jiggery-pokery,” which is defined in the dictionary as “dishonest or suspicious activity.” (But when “state” means “state and federal,” maybe dictionaries just get in the way.)
The labor issues? The decision means that ACA tax credit subsidies will be available to health insurance consumers in the many states that do not have exchanges. Employers will continue to deal with the legal and regulatory landscape of the ACA, with some continuing questions about how the law is going to be applied. Several challenges to parts of the ACA are still pending, but the structure of the law will probably stay intact absent legislative action, which is unlikely as long as President Obama remains in office.
In 2018, the so-called “Cadillac plan” tax will take effect. This is a 40 percent tax on insureds for employer-paid health insurance plans that are too “rich” (that is, they exceed a cost of $10,200 for an individual and $27,500 for a family). The tax applies to every dollar of insurance cost above the thresholds. The idea is to penalize “wealthy” employees who buy extravagant plans and to encourage cost-conscious shopping for plans with more limited benefits. A “Corolla plan” would mean less demand for medical services and less growth in medical costs.
But this “Cadillac plan” tax will not affect only the wealthy. Many participants in jointly-managed Taft-Hartley Fund health insurance plans (sometimes called “union plans”), as well as participants in typically generous government employee benefit plans, will be hit by the tax, absent reductions in the cost of the plans they currently have. Reports are already circulating that, to avoid the Cadillac plan tax, many union and state employee plans are increasing deductible levels and out of pocket maximums to bring plan premiums below the thresholds.
The Cadillac plan tax has the attention of organized labor and its lobbyists. Even before the effective date of the ACA, labor unions began lobbying the White House to give union plans an exemption, but to date they have had no luck. Some Republicans in Congress may be on their side, given that the U.S. Chamber of Commerce has opposed the tax. Watch for more efforts from organized labor and business interests opposed to the tax to try eliminate it. Nothing new there, except for the possible “strange bedfellow” relationship between unions and pro-business interests.