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The Poison Pill in PPACA Used to Extract Concessions from Labor


Since Saturday night (August 6), 45,000 members of the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) have been on strike from Massachusetts to Virginia — in the largest private sector work stoppage in the last seven years.

Health care cost shifting is high on the list of givebacks demanded by their employer, Verizon, which reported $10.2 billion in profits in 2010 and net income of $6.9 billion during the first half of this year.

The two unions involved walked out in 1986, 1989, 1998, and 2000 to maintain decent employer-paid medical coverage.  In 2003 and 2008, they waged militant contract campaigns over the same issue, but narrowly avoided striking.

Some current strikers are veterans of the epic battle 22 years ago against NYNEX, a predecessor of VZ that operated just in New York and New England.  In one of the few successful anti-concession campaigns of the 1980s, 60,000 IBEW and CWA members stayed out for four months to beat back management demands for premium sharing.

Two union members died, directly or indirectly, as a result of that struggle.  Scores were arrested, more than 250 were fired or suspended, and all employer-paid health insurance was cut off by NYNEX, to pressure workers and their families into a concessionary settlement.

As I reported in Civil Wars in U.S. Labor (Haymarket Books, 2011), NYNEX strikers countered this attack by carefully framing the main strike issue in a way that resonated far beyond their own ranks.  Their buttons, banners, press releases, and leaflets all made it clear that the solution to medical cost inflation was "Health Care for All, Not Health Cuts at NYNEX!"

Backed by allies like Jesse Jackson and Physicians for a National Health Program (PNHP), the NYNEX strike became a popular focal point for ongoing public agitation and membership education about the need for Canadian-style national health insurance.  This community-labor coalition building, plus the enormous sacrifices of the strikers themselves, paid off in the end.

When the strike was over, telephone workers in the northeast still made no premium contributions for comprehensive individual or family coverage.  The same is true today, at a time when almost all other workers are paying an even bigger share of the cost of their job-based benefits, if they have any.

"Cadillac" Tax Impact

After two decades of battling to keep their own insurance affordable (while calling for Medicare-for-All as a better alternative for themselves and everyone else) ex-NYNEX strikers felt quite betrayed last year when leading Democrats like Max Baucus, Harry Reid, and President Obama targeted their medical benefits (and other union-negotiated plans) for unprecedented taxation to fund the Patient Protection and Affordable Care Act (PPACA).

What union activists always thought was a "Chevy" — that everyone should have in their garage via a tax-supported social insurance system — was routinely described (and demonized) in Congress as "Cadillac coverage."  According to the Obama Administration, such "luxury plans" must be taxed — to restrain rising health care costs (and discourage "overuse"), raise more federal revenue for expanded Medicaid eligibility, and cross-subsidize the less generous private insurance coverage mandated, for individuals but not employers, by PPACA.

After frantic union lobbying, the resulting 40 percent "excise tax" on part of the value of higher cost medical plans was ultimately postponed until 2018 (and its impact mitigated in other ways).  Nevertheless, as the current benefit imbroglio at Verizon illustrates, this is a poison pill in PPACA that's already making union bargaining more difficult, even at hugely profitable firms.

Just last month, VZ management sent a message to all of its union-represented "associates" in the northeast, which informed them that they must pay more for their benefits now, thanks to Obama's version of "health care reform."  Said Verizon:

Under the 2010 Patient Protection and Affordable Care Act, an excise tax will be levied on healthcare plans with very generous plan design components (so-called "Cadillac plans"). . . .  This excise tax is projected to cost the company as much as $200 million in 2018 when the tax is imposed; however, Verizon is required to account for this cost now.  Accordingly, we will need to modify plan designs to avoid the impact of this tax.

Not surprisingly, Verizon's tax-avoidance scheme requires shifting costs to workers.  According to the company, its "current average annual medical coverage" expense is nearly $14,000 a year for each union member, which is "twice the average for comparable companies in the eastern U.S. whose employees make contributions toward their healthcare."  In addition, "99 per cent of companies now charge for family health coverage."  So this disparity needs to be corrected by forcing workers with dependents to pay $1,300 to $3,000 a year for such benefits.  (Overall, the total, per employee, cost of all pay and benefit concessions currently sought by Verizon is $20,000, according to CWA President Larry Cohen.)

As Mark Dudzic, from the Labor Campaign for Single Payer, points out, if management was "really concerned about the well-being of its 'associates,' the company would work with the unions to transform PPACA into an improved and expanded Medicare for All program.  More practically, they could set up joint committees to work on plan design and cost savings to keep under the 2018 excise tax triggers."

The Single-Payer Alternative

Instead, Verizon has always maintained fierce ideological opposition to any single-payer legislative proposals.  And, in bargaining this summer, it has spurned "cost-containment" committee schemes as well — because other unionized companies, like GE and AT&T, have already won cost reductions through recently negotiated increases in medical plan contributions by their employees.

As Dudzic notes, it's becoming increasingly difficult, under these circumstances, to defend benefit packages that only those with remaining bargaining clout or strike capacity still have.  "We've got to find ways to turn around this race to the bottom and do what our brothers and sisters in the rest of the industrialized world have already done — remove healthcare from the bargaining table and establish it as a birthright for everyone in America," he said.  "In the meantime, we need to inspire all workers to fight for Verizon-quality benefits, rather than resent those few who have fought and sacrificed to maintain them."

Some CWA and IBEW strikers who are trying to uphold their valiant tradition of fighting for real health care reform — while resisting benefit cuts sought by management — face an additional political challenge this year.  Locally and nationally, "health care for all" was still an unmet demand, with multiple meanings, two decades ago.  Now, many workers have been told by their own unions that "universal coverage" has been achieved — in the form of  "Romneycare" in Massachusetts and through PPACA, the national plan that Obama modeled on Romney's.

Meanwhile, even Democrat-dominated state legislatures (like ours in the Bay State) are imposing curbs on the scope of public employee bargaining about medical benefits, to allow municipal governments to shift costs unilaterally, if necessary.  And, in the private sector, even deep-pocketed employers like Verizon are using their union contact negotiations to win similar concessions from workers, wherever they can.

Clearly, Romneycare and Obamacare aren't providing their promised cost-shifting relief.  In the case of the latter, the "excise tax" is already adding to the pressure for give-backs.  The only effective response is what's worked before in telecom: linking workplace militancy and strikes to revived political action that blows the whistle on PPACA (and its multiple poison pills), while mobilizing labor and its allies for more Vermont-style single-payer initiatives, no matter how many obstacles they face, at the state level or nationally.

Steve Early is a labor journalist, lawyer, and former national union representative for the Communications Workers of America, based in Boston.  For more on SEIU's  call center servicing experiment, see Early's latest book, The Civil Wars in U.S. Labor, available atwww.civilwarsinlabor.org.  He can be reached at[email protected]. 

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