Thursday, July 31, 2014

Rising health insurance costs and the Affordable Care Act mean re-negotiating collective bargaining agreements

The past few years have seen state and local governments looking for ways to manage ever-rising health insurance costs.  With the passage of the Patient Protection and Affordable Care Act, (the “ACA”), public administrators face new challenges. From the cost of retiree benefits to the so-called “Cadillac tax”, the Affordable Care Act and rising insurance costs mean re-negotiating collective bargaining agreements.  Here’s why.

1. Healthcare benefits are a mandatory subject of bargaining. This means that parties are required to negotiate in good faith and refusing to do so is an unfair labor practice.      


Re-negotiating collective bargaining agreements is needed
after the "Cadillac Tax" and the passage of the "ACA". 
2. Retiree health benefits are becoming a thing of the past. Employers are looking at ways to restructure benefits for current retirees and reduce or eliminate them for future retirees.  In some cases, this means re-negotiating collective bargaining agreements to allow employers to reduce costs by moving retirees from employer plans to ACA health exchanges.   

3. Reopener clauses. By definition, contracts that contain reopener clauses allow parties to reopen a contract before its expiration date. Although not new, re-opener clauses are traditionally used to re-negotiate wages upon the occurrence of a specific event.  They are now being used to re-negotiate health benefits ahead of the contract’s expiration by requiring the parties to meet and review existing plans and discuss possible cost-saving alternatives available under the ACA.

4. Arbitration awards. Arbitration awards have begun to tip in favor of employers.  There is recognition among arbitrators that municipalities do not have the financial resources to maintain current health benefits and changes must be made in how employee health insurance is funded.  For union members, this means higher co-pays and cost-sharing, and mandatory participation in or restructuring of existing HD-HSAs (high deductible and health savings account plans.)

5. The “Cadillac tax”.  Employers that provide plans in excess of the ACA cost cap must find ways to cut insurance costs or, beginning in 2018, face a 40 percent excise (“Cadillac”) tax. Historically, union workers have traded wage increases to maintain expensive health benefits, the result now being that most plans will be subject to the Cadillac tax. Public sector employers across the country are pressuring employee unions to accept cheaper health benefits to avoid the tax. 

Although labor unions were key supporters of the Affordable Care Act, they now believe that it will shatter hard-earned health benefits.  Maybe, maybe not. Time to negotiate.

Cynthia Anger has been an Associate Faculty member at Post University since 2011 teaching Labor Law and Relations in the Master of Public Administration program.  A practicing attorney, she holds a Master’s degree in Public Administration and is a certified zoning enforcement official.  Anger serves as a Superior Court Magistrate for the State of Connecticut and as an Arbitrator for the Financial Industry National Regulatory Authority.  She has over 20 years’ experience as a full-time municipal attorney.