With the passage of the Affordable Care Act (ACA) a few years ago, Americans are more focused on understanding their health insurance options than ever before. Many people obtain their insurance from their employers, and have questions about the specific arrangement their employer uses for health insurance.
Understanding Multiemployer Plans
A multiemployer health insurance plan, also known as a “Taft-Hartley Health Plan,” is a type of employer-offered health and benefit coverage. Generally these are collectively bargained and used in employment industries where labor union membership is common.
These plans are set up under the Labor Management Relations Act of 1947, better known as the Taft-Harley Act. Plan assets are managed by a joint board of trustees with equal representation from labor and management. The assets are placed in a trust fund, and employees that change jobs can carry their insurance with them as long as the new employer participates in the same plan.
Because these multiemployer plans are part of a collective bargaining agreement they often include multiple benefits, such as health coverage, welfare, and pension arrangements. From the employee standpoint, these plans operate as other health and benefit plans, and may include an employee contribution, copayments, and deductibles.
Eligibility for coverage is generally determined by number of hours worked during a specific period of time. Sometimes the hours for non-union members covered by the bargaining agreement are higher than that for union members.
Multiemployer Plans and the ACA
Because multiemployer plans are usually self-funded, they are not actually insurance policies and are thus exempt from state insurance laws. However, the minimum requirements of the ACA are federal law, and the health coverage offered by multiemployer plans must meet those essential coverage requirements.
Employers that contribute to a multiemployer plan are considered to be meeting the employer mandate as long as the essential benefits are available to full time staff. However, a special consideration applies to the historically benefit-rich health plans that many unions have negotiated. The “Cadillac Tax” is a non-deductible 40 percent excise tax on the cost of employer-sponsored health care coverage provided to an enrollee that exceeds a specified threshold. This includes medical and pharmaceutical coverage, but not separate dental or vision plans.
There are no exceptions to the Cadillac Tax for plans that are negotiated through a collective bargaining agreement. The tax goes into effect in 2018, so unions and employers who are using multiemployer negotiated plans that are very high-cost will need to start considering the ramifications soon, before the next round of bargaining agreements set new standards into place.
Multiemployer plans have been in place for decades, and they give both employers and employees important flexibility in coverage options. However, in order to comply with the ACA, there will important considerations to be made at the bargaining table. Ensuring essential coverage at an affordable level, even for lower-wage employees, will be one major issue. Balancing benefits and pay while avoiding the Cadillac Tax will be another.
For more information on how the ACA affects union workers, read ObamaCare and Unions.