Unionized employers have been the last to face the music regarding the Affordable Care Act (“ACA”). Some employers admit they assumed last year’s election would resolve the issue. Others await more guidance from the government, especially as to multiemployer health plans. Still others inexplicably are not taking their unionized workforces into consideration as they work on compliance strategies. Even today, just months before the 2014 changes, labor relations personnel are negotiating open contracts without first checking to determine what needs to be done to ensure ACA compliance.
Unionized employers need to confirm that their proverbial houses are in order and, if not, work to get them squared away well before the end of the year — if not before open enrollment. Bargaining may be involved, which can take time — and employers must now give at least 60 days’ notice before making material mid-year modifications to their plans. Unfortunately, there is no one size fits all answer as to what to do, for every contract and benefit situation is different. But there are some common points unionized employers need to keep in mind:
First, regardless of what your contracts say, what is your ACA compliance strategy? Do you want to provide insurance that complies with the Act, not provide any insurance, or provide coverage that is unaffordable? All of these alternatives may be viable options. Providing “no” coverage will result in the $2,000 annual penalty per employee company-wide, less the first 30 employees in the event a single employee obtains subsidized coverage on an insurance exchange. Providing “unaffordable” coverage will only result in an annual penalty of $3,000 for each employee who obtains subsidized insurance from the exchange. In certain circumstances, given the subsidies available to employees whose household incomes are less than 400% of the poverty level ($92,200 for a family of 4), both employees and the employer may be financially better off if coverage is unaffordable or otherwise not provided. Because the penalty will be assessed to the individual corporate entity, different related corporate subsidiaries can make different decisions without necessarily affecting the rest of the organization. How the employer answers this question will drive how it wants to proceed with its union contracts.
Second, assuming the employer wants to provide coverage, do your collective bargaining agreements provide minimal affordable coverage? In other words, does the employee have to pay no more than 9.5% of his or her household income for single coverage, and does the plan cover at least 60% of the actuarial value of health costs? If not, the employer will be looking at penalties unless it changes its plan — an action that may require bargaining.
Third, do your labor contracts provide for medical plan eligibility for all “full-time employees,” which the ACA defines as employees working an average of 30 hours or more per week? If the contract only provides coverage to employees who work, for example, 35 or more hours per week, the employer could potentially be on the hook for an employer penalty. Contracts that contain waiting periods of greater than 90 days for full time employees will expose employers to potential penalties as well.
Fourth, contracts that have negotiated insurance terms that do not comply with the ACA’s 2014 changes (e.g., ban on annual limits, no preexisting condition exclusions, etc.), or do not offer coverage at all also need to be addressed. Not only will these provisions need to be modified, but the required changes could impact the cost of this coverage.
Fifth, while the Cadillac tax does not kick in until 2018, no employer wants to be in the middle of a contract or facing negotiations for a collective bargaining agreement expiring in 2017 with insurance coverage that could result in the Cadillac tax. The time to negotiate plan changes to prevent the Cadillac tax from taking effect, and learn whether your multiemployer funds are projected to be subject to the tax, is when contracts are open now.
Sixth, employers in multiemployer plans need to ensure both that their labor contracts do not create any ACA issues, and that the funds themselves are or will be compliant with the ACA. Recent guidance has provided transition relief for multiemployer plans themselves for 2014 — but only for 2014. Click here to see an alert on the guidance. But collectively bargained waiting periods of greater than 90 days and collectively bargained restrictions on employees who average 30 but less than 40 hours of work per week are still problematic under the new ACA rules and must be addressed.
These six issues are merely the tip of the iceberg. There is a lot to be done, and little time in which to do it. Each employer’s answers and negotiated solutions will differ.