Labor: Collective bargaining and the Affordable Care Act

Preparing for the implementation of the employer mandate

Employers and unions alike are scrambling to come to terms with the Affordable Care Act (ACA), which establishes new rules for employment-related health coverage. Employers, however, currently face a heavier compliance burden than unions because of the employer mandate, which becomes effective on Jan. 1, 2014. Under the employer mandate, if an employer fails to offer all full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, the employer risks crippling liability. Smaller penalties can be triggered when the coverage offered fails to meet a “minimum value” or an “affordability” requirement.

But why is the compliance burden heavier for employers than for unions if the employer agrees to cover bargaining unit employees under a multiemployer plan proposed by the union? The answer is simple but disappointing: if the multiemployer plan fails to satisfy the offer-of-coverage requirement, the minimum value standard or the affordability standard, the resulting liability exposure falls only on the employer. Thus, when the employer mandate becomes effective, employers will have what amounts to a duty to see to it that their full-time employees are offered employer-subsidized participation in a health plan that satisfies the statutory description, and that the offer is made at the proper time, and yet those employers participating in a multiemployer health plan may well have no direct control over the plan and no timely access to vital information.

Collective bargaining under this new paradigm will be challenging, but by understanding the fundamentals of health coverage after 2013 and appreciating concerns bargaining representatives may also have about the ACA, employers should be equipped to negotiate collective bargaining agreements that not only comply with the ACA, but also serve the organization’s business interests.

The starting point for any negotiations is for all parties to understand and use consistent definitions of words, terms and phrases that have a specialized meaning under the ACA. Relying on the pre-ACA common meaning of certain terms will be counterproductive. The ACA adopted a new vocabulary to describe concepts that are key to its operation and design, including words and phrases that formerly had a loosely-defined but conventional meaning in the bargaining context. Perhaps the best example is “full-time employee,” which prior to the ACA, generally referred to a range of either working hours or (more often) work schedules, and sometimes even reflected the results of an eligibility determination rather than a factor considered in making that determination. By contrast, the ACA defines an individual as a full-time employee for a calendar month if the individual was employed for 30 or more hours of service per week on average during that month. Learning this new vocabulary, and confirming your bargaining counterparts share your understanding, is essential.

Another important step to prepare for negotiations is to understand some of the basic ways in which the ACA influences substantive bargaining goals and opportunities. These include continuation or loss of the union plan’s “grandfathered” status; potential desire by unions to bargain low paid members out of coverage to gain access to federally-funded premium tax credits; the potential advantages to employers of covering bargaining unit members under the employer’s non-union plan; and, perhaps most significantly, avoiding an assessment under the employer mandate. A sound negotiation strategy also must take into account that virtually all currently-available regulatory and other guidance issued by government agencies is temporary and may not apply after 2014. Avoiding the consequences of future noncompliance can be addressed in a variety of ways. These include:

  • Re-opener agreements to ensure an opportunity to meet and negotiate new healthcare terms in the event the plan does not satisfy ACA requirements
  • An expedited grievance procedure to arbitrate non-compliant plans
  • Expedited federal court actions to litigate non-compliant plans
  • Guarantees from unions to provide an ACA-compliant plan,
  • Agreements that an employer can reject the multi-employer plan mid-term and adopt its own employer-sponsored plan that is compliant with ACA
  • Union indemnification to cover any tax penalty associated with a non-compliant union plan

The employer mandate goes into effect soon, so time is short to safeguard against liability arising during 2014. Between now and then, however, an employer should carefully evaluate whether agreeing to participate in a multiemployer plan is certain to satisfy the employer’s duties under the employer mandate. If not, the employer should use whatever negotiating options are available to it to acquire the level of confidence the employer needs on this subject. In the case of agreements scheduled to terminate after Jan. 1, 2014, the employer should explore any opportunity to reopen the contract’s welfare benefits clause to achieve the same effect.

Implementation of the ACA creates unprecedented new bargaining issues that do not fit neatly into traditional collective bargaining strategies. This means employers should seek contract language that gives them authority to alter, or exercise enough meaningful control over, health plans during the term of the collective bargaining agreement to ensure compliance with the ACA’s employer mandate.

Contributing Author

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Ruthie Goodboe

Ruthie Goodboe is a shareholder in the Detroit Metro office of Ogletree Deakins, an international labor and employment law firm representing management. She counsels and...

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