Unions Are Major Recipients of Obama Health Care Waivers

Doctors in conferenceWhen President Obama in March 2010 signed the Patient Protection and Affordable Care Act (P.L. 111-148), the nation’s most expensive social legislation in decades, he announced, “The bill I’m signing will set in motion reforms that generations of Americans have fought for and marched for and hungered to see.” Yet what the law seems to have set in motion is a rush to obtain exemptions from group coverage requirements. New data show nearly 1,400 insurers, employers, unions and other organizations thus far have received waivers from the Department of Health and Human Services (HHS) from a requirement that forces group health plans to offer at least $750,000 in payouts per enrollee this year, a figure set to rise even higher until its phase-out in 2014. The situation is emerging as a lesson in how government, once enlarged, becomes a favor factory. And unions are receiving lots of favors.

A waiver, in essence, is a grant of permission to break the law. That raises the question: Why do so many Americans want to break the new health care law? A likely answer: Most Americans, despite the uplifting presidential rhetoric, never wanted it in the first place. Even with large Democratic majorities in the House and Senate, supporters in Congress had to resort to political bribery (e.g., “the Cornhusker Kickback,” “the Louisiana Purchase”) and unusual parliamentary maneuvers to secure passage of the final bill. The resulting 2,800-page law, repealed by the House of Representatives (but not the Senate) and declared unconstitutional by U.S. District Judge Roger Vinson this January, is a cornucopia of mandates and exemptions, a virtual invitation for politically-connected organizations to win unearned advantages. Twenty-six states have filed a court challenge in support of Judge Vinson’s ruling.

The heart of the “Obamacare” law is a mandate that every American, save for cases of financial hardship, must carry health insurance. Those who can’t (or won’t) document coverage by an employer, government or individual/family policy, would face a substantial fine from the IRS. Judge Vinson, though reluctantly, has ordered all states to continue implementing the law while the case remains active. A randomly-selected three-judge panel in the 11th Circuit Court of Appeals is set to take up the case next month. A major obstacle to this mandate taking effect is that private insurance plans might not be able to comply with a requirement to offer a certain minimum annual payout per enrollee. In 2011, mandatory minimum coverage is $750,000, a figure set to rise to $1.25 million in 2012 and $2 million in 2013. In 2014, when the law takes effect and state-run insurance exchanges arrange for coverage, there would be no limit. Low-cost (“mini-med”) health plans, typically made available to low-wage employees, effectively would be prevented from competing for the consumer dollar.

Many businesses, especially in labor-intensive industries, justifiably complained about the pending burden. In response, the Department of Health and Human Services late last summer announced that it would grant renewable one-year waivers to health plan sponsors whose insurers are unable to meet per-person coverage floors. According to a September 3 memo by Steve Larson, director of HHS’ Office of Consumer Information and Insurance Oversight, waivers would be granted if the department determines “compliance with the interim final regulations would result in a significant decrease in access to benefits or a significant increase in premiums.” Soon after, a number of major private-sector employers with high proportions of low-wage workers sought and received waivers. In the restaurant industry, recipients have included the McDonald’s, Olive Garden, Red Lobster, Waffle House and Jack in the Box chains. Other employers granted waivers include Cigna, Aetna and Universal Studios in Orlando.

At the end of April, fully 1,372 organizations had acquired waivers out of 1,464 applicants, a figure representing about 3.1 million individuals. Of the 1,372 approvals, 342 represented health plans sponsored by unionized workplaces – 27 for union plans and another 315 for joint employer-union plans. Even that combined figure is misleadingly low, for it covers 1.55 million workers, or half all exempt workers. There is high irony here. It was arguably organized labor more than anyone else who lobbied the White House and Congress for passage. The downside is that enrollees in health plans not receiving a waiver will pay more.

So who are the lucky unions? For starters, they include any number of affiliates of the Service Employees International Union (SEIU) whose Committee on Political Education contributed $27.8 million to Barack Obama’s 2008 presidential campaign. Among them: the Service Employees Benefit Fund, which insures 12,000 SEIU health care workers in Upstate New York; Local 25 in Chicago, with about 25,000 enrollees; and the Local 1199 SEIU Greater New York Benefit Fund, with nearly 4,550 enrollees. SEIU health and welfare funds in St. Louis and Cleveland also have received waivers. All this would seem to discredit claims that the law creates a level playing field for all Americans. Service Employees President Mary Kay Henry sees the waiver process as a minor inconvenience in a noble larger cause. “Americans cannot afford to see future benefits of the law derailed,” she said. “Without the insurance protections that take effect in 2014, one of every two adults might otherwise be denied healthcare coverage due to a preexisting condition such as asthma, heart disease, diabetes or arthritis. And Americans cannot afford for their elected representatives to waste time on the job when the problems facing working families are real and urgent.”

The United Food and Commercial Workers, whose Active Ballot Club PAC contributed a combined $3.5 million to Democratic candidates for federal office during the 2008 and 2010 election cycles, is another union with a hunger for waivers. Among the UCFW-sponsored health plans with at least 3,000 enrollees receiving waivers are: the Indiana Area UFCW Union Locals and Retail Food Employers’ Health and Welfare Plan; the UFCW Local One Health Care Fund (Upstate New York); the UFCW Local 1262 and Employers Health and Welfare Fund (Northern New Jersey); UFCW Local 371 Amalgamated Welfare Fund (Connecticut); the UFCW Local 1000 and Kroger Dallas Health and Welfare Plan; and UFCW Local 464a (Northern New Jersey and Westchester County, N.Y.). Other unions winning exemptions are: International Brotherhood of Electrical Workers Local 915 (Tampa); United Association of Plumbers and Pipefitters Local 123 (Tampa); Asbestos Workers Local 53 (Kenner, La.); the United Federation of Teachers Welfare Fund (New York City); and the International Union of Painters and Allied Trades.

Some members of Congress also are seeking waivers on behalf of their respective states. Most prominently, Sen. Ron Wyden, D-Ore., an early booster of the Obama health care overhaul, is sponsoring legislation, the Empowering States to Innovate Act (S.3958), to move up the starting line for State Innovation Waivers to 2014, as opposed to 2017, as current law stipulates. The measure would give states extra time to design programs to help families and small businesses. He’s attracted support from Sens. Ben Nelson, D-Neb., Mary Landrieu, D-La., Scott Brown, R-Mass., Joe Manchin, D-W.Va., and Patrick Leahy, D-Vt. Other waivers, while not the product of legislation, have raised suspicions of congressional influence. Of the 204 exemptions granted in April, for example, 38, or nearly 20 percent, went to restaurants, nightclubs and hotels in House Minority Leader Nancy Pelosi’s San Francisco district. Given that Rep. Pelosi appeared positively orgasmic at the health care law’s signing ceremony of March 23, 2010, this is more than a little ironic.  

To a large extent, the proliferation of waivers is a healthy development. It provides health care plan sponsors with a means of escape from an unworkable law. If that qualifies as hypocrisy, then by all means let us make the most of it. But on the minus side, it has politicized the allocation of health care, making health care providers and consumers more dependent than ever upon bureaucratic whim. The “winners” are those with the most access to power. Rep. Fred Upton, R-Mich., chairman of the House Energy and Commerce Committee, finds this tendency disturbing. He’s one of three House committee chairmen using new oversight powers to investigate waiver rules. “The fact that over 1,000 waivers have been granted,” Upton noted in March, “is a tacit admission that the healthcare law is fundamentally flawed.”

Upton isn’t the only person up in arms. Rep. Trey Gowdy, R-S.C., chairman of the health care subcommittee of the House Committee on Oversight and Government Reform, believes that Health and Human Services Secretary Kathleen Sebelius lacks the statutory authority to grant waivers. “The entire waivers process is predicated on the ability of the secretary to grant waivers in the first place,” he said. “However, this seemingly fundamental step – the statutory basis for waiving compliance with the law – appears to have been wholly neglected by the plain language of the statute.” Meanwhile, a nonprofit “527” group whose advisers include former Bush White House political director Karl Rove, Crossroads Grassroots Policy Strategies, filed suit against HHS in March to gain access to documents indicating the criteria upon waiver decisions have been based. The move followed the lack of an administration response to its January 7 request under the Freedom of Information Act. Crossroads President Steven Law, a Bush-era Labor Department official, explains his group’s position: “Until President Obama is willing to grant the entire country a waiver from ObamaCare, his administration needs to come clean on how they decide who wins and loses in the waiver lottery.”

This raises the ultimate issue: Why did Congress bother to pass a law that so few people seem to want for themselves? That the Obama administration has issued so many waivers, and to more than 90 percent of applicants, is a testament to the law’s unpopularity. The main original purpose of the health care law was to eliminate arbitrary insurer determinations of patient eligibility based on age, preexisting conditions and other risk factors. Now we have the specter of President Obama’s allies saying, “It’s a great law, but it’s not for us. Let someone else pay the tab.” The irony is glaring. But don’t expect labor leaders to admit as much. For them, access to power is the name of the game.


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