Health Care Reform: What Happens to Multiemployer Plans?

My father is a trustee of one of the New York State Laborer's union funds, and he pointed out something about multiemployer funds that I hadn't known--they're uniquely vulnerable to the proposed excise tax on health plans that cost more than $8,000 for an individual, or $13,000 for a family.

I don't know what percentage of the population is covered by multiemployer plans, but it's significant; they're quite common in the construction and manufacturing sectors.  They enable union workers, in particular, to shift between employers while keeping their benefits intact.

The way they work, at least in the construction unions, is that you earn benefits every hour you work.  The interesting wrinkle is that--at least in some cases--you earn those benefits whether you're single or married.  You're giving up the same portion of your wages as a young single man as you would if you were 45 and had six kids. 

Say everyone in your MEP is paying $20,000 a year in foregone wages.  The single guys will all get hit by the excise tax, while the married guys won't.   

This is important if you expect the excise tax to "bend the curve", because in this case, there's not much incentive to try to control costs--at least, as long as you have enough single workers to drag your average down below $21,000 a year, where the family plan excise tax kicks in.

Recommended Reading

Only a minority of your workers will be paying the tax, after all, and there's no realistic hope of getting your plan's average cost down below $8,000 a year, unless you either fire all the guys with families, or cut the policy to the barest bones.  And the difference between $8,000 and the average cost of a family plan in your region is likely to be much greater than the difference between the average cost of a family plan in your region, and the cost of the benefits package you'd like to offer.  That is, you would save some money by reducing your cost from say, $16,000 to $13,500.  But that pisses off a lot of your membership, and it still leaves you paying a sizeable excise tax on every member who is single.

You can see a lot of ways to "fix" this problem, including dissolving the multi-employer plan, changing the way benefits are accrued, or telling your single members to buy their insurance on the open market.  Or maybe the single members are helping you keep the average cost of the married folks down below $21,000, and so you're perfectly happy to get away with just paying the excise tax on their benefits.  At any rate, few of these solutions involve bending the cost curve.