Bloomberg News

Unions Denied Request for Tax Break Under Obama Health-Care Law

September 14, 2013

Unions Denied Request for Tax Break Under Obama Health-Care Law

Labor unions were among the strongest proponents of the health-care law when it was being debated by Congress, and U.S. President Barack Obama's administration is trying to maintain their support as it rolls out new insurance programs this fall. Photographer: Mark Wilson/Getty Images

The U.S. government has denied a request from U.S. labor organizations to allow workers covered by an employer-sponsored plan to claim a tax credit under President Barack Obama’s signature health-care law.

The move marks a setback for the AFL-CIO, the nation’s largest health federation, which earlier this week called for classifying multiemployer health plans run by labor in a way that would make members eligible for the tax break. The AFL-CIO, a staunch political ally of the president, endorsed the Affordable Care Act when it was enacted in 2010.

The administration’s move was described in a letter yesterday from the Treasury Department to Senator Orrin Hatch of Utah, the top Republican on the Senate Finance Committee. Hatch, who released a copy of the letter, had sought information from the agency on whether workers who get health insurance from an employer would qualify for the break.

“An individual who is sponsored by an eligible employer-sponsored plan would not be eligible to receive a premium credit,” according to the letter, signed by Alastair M. Fitzpayne, assistant Treasury secretary for legislative affairs. That conclusion applies to whether a worker is covered by “a single-employer plan or a multiemployer plan.”

Labor unions were among the strongest proponents of the health-care law when it was being debated by Congress, and the Obama administration is trying to maintain their support as it rolls out new insurance programs this fall.

AFL-CIO Resolution

Before the letter to Hatch was made public, Obama met yesterday at the White House with union leaders including AFL-CIO President Richard Trumka. On Sept. 11, at the end of its quadrennial convention in Los Angeles, Trumka’s group approved a resolution urging changes to the health law

Besides its request on the premium tax credit, the AFL-CIO expressed opposition to the law’s requirement that health plans, including those of unions, pay a reinsurance fee of about $63 per member next year to the government. The resolution also urged expanding health care under the law to more employers, such as construction companies with five or more employees.

Republicans have vowed to block the union-backed changes, making it unlikely they could get through Congress. Hatch released the Treasury Department letter late yesterday jointly with Representative Dave Camp, a Michigan Republican who is chairman of the tax-writing House Ways and Means Committee.

“There has been far too much special treatment for politically favored friends of Obamacare,” Hatch and Camp said in a statement accompanying the letter. “But when it comes to employers and taxpayers picking up the health care tab for labor unions -- it appears that is a price that is simply too high.”

‘Devastating Impact’

The AFL-CIO, a federation of 57 labor unions with 12 million members, supported the law when it was passed. This week, two top Obama administration officials, White House senior adviser Valerie Jarrett and Labor Secretary Thomas Perez, were in Los Angeles to reassure union officials that the White House was open to weighing changes.

As written, the health law “can have a devastating impact on our ability to provide health insurance,” Terry O’Sullivan, general president of the Laborer’s International Union of North America, said at the AFL-CIO convention.

The 2010 law established public exchanges, through which individuals can buy insurance, which are set to open Oct. 1. Under the law, low- to moderate-income workers who buy insurance through the exchanges would qualify for a tax credit. The average subsidy per eligible enrollee buying insurance through the exchanges is projected to be $5,300 in 2014, according to the nonpartisan Congressional Budget Office.

Force Employees

Without the subsidies, some employers may stop offering group plans that many union members are currently enrolled in, according to Timothy Jost, a professor at Washington and Lee University School of Law in Lexington, Virginia. That will force those employees into the exchanges, which may cost more than their current health plans.

Republicans will use labor opposition to the law to continue their attacks, Jost said. Unions, which represented 11.3 percent of workers in 2012, helped Obama’s campaign in 2008 and 2012 by getting Democratic voters out to the polls.

To contact the reporters on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net; Michael Shepard in Washington at mshepard7@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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