Labor unions got short shrift when Obamacare was passed. Photographer: Daniel Acker/Bloomberg
Labor unions got short shrift when Obamacare was passed. Photographer: Daniel Acker/Bloomberg

Unite Here, a union that represents service industry workers, has released a pretty blistering report condemning Obamacare. The report itself is not particularly interesting; its economic analysis is a mishmash of dubious claims and complaints about giving money to insurers but not to unions. On the other hand, the existence of this report is very interesting indeed -- the miracle is not how well the bear dances but that it dances at all. The spectacle tells you a lot about the politics of the Affordable Care Act and the modern Democratic Party.

In the interest of full disclosure, I should note that my father oversaw labor negotiations for years in his role as the head of a construction trade association, and I believe he still sits on the pension board of a union. I have learned a lot about multiemployer plans from him over the years. However, I did not consult him about this post. From which you may infer that I should call my father more often, and right you are. Sorry, Dad.

But I digress.

Notwithstanding my reservations about the quality of this report, unions actually do have three big problems with Obamacare. As the Official Blog Spouse has chronicled, Obamacare has made things hard for the multiemployer health plans that many unions offer:

The issue here is how the law deals with multiemployer health plans, which cover as many as 26 million Americans, and are especially popular with unions whose members frequently work irregular hours for multiple customers.

ObamaCare requires these plans to comply with a number of regulations that are likely to drive up costs, but it doesn’t allow employers who provide benefits through multiemployer plans access to subsidies or tax credits. The only way for many of those union members currently covered by multiemployer plans to get subsidies would be for the unions to stop offering those plans.

The first problem is that Obamacare regulations are already pushing up the cost of multiemployer insurance plans. Moreover, many of the regulations don’t really fit the plans -- for example, many multiemployer plans do not distinguish between single and family policies, offering everyone the same insurance at the same cost.

The second problem is that the 40 percent excise tax on especially expensive plans -- the so-called Cadillac tax -- is going to hit union plans especially hard. Unlike most people negotiating compensation, union negotiators make an explicit trade-off between wages and other benefits, and the benefit that they seem most attached to is generous health plans. Union plans are made more expensive still because union membership is heavily skewed toward older workers. They are thus very likely to get hit by the Cadillac tax, which takes effect in 2018.

And the third problem is that Obamacare undercuts one of the key benefits of being in a union. Take a low-wage service worker who is currently insured through her union's multiemployer plan. If she went to work for a nonunion shop, she could get a substantial wage hike, use part of it to buy a heavily subsidized exchange policy, and still be better off. As I heard one expert say, Obamacare turns health insurance from an organizing tool to a disorganizing tool.

No wonder the unions are mad. What’s amazing is that they supported Obamacare with just vague assurances from the Barack Obama administration that it would fix everything later.

What’s also interesting is that the administration hasn’t really tried to fix it. Although Labor Secretary Thomas Perez proposed some rules changes in December to exempt "excepted benefits" (vision, dental and employee assistance programs) from some of Obamacare's provisions, that did little to answer union concerns. There has been no big push by the administration for legislative amendments on the unions' behalf. Sure, those would be difficult with a Republican-controlled House of Representatives that has no interest in helping unions, or the president. But the administration hasn’t made even a significant symbolic effort, and union complaints have been increasing in volume since the law was passed.

Clearly, the administration reckons it can weather public rebukes from the unions much better than it can endure the backlash they’d get for helping them. This is potentially an existential threat to the institutions that used to be the backbone of the Democratic Party. Now it's treating them more like the appendix.

That tells you something significant about how Obamacare was passed. But it tells you something even more significant about the Democrats and the administration. They’re still willing to deliver symbolic victories such as appointments to the National Labor Relations Board, but as far as policy making goes, private-sector unions are increasingly less relevant. That has huge implications for the future of the Democratic Party, not to mention U.S. economic policy.

To contact the writer of this article:
Megan McArdle at mmcardle3@bloomberg.net.

To contact the editor responsible for this article:
James Gibney at +1-202-624-1863 or jgibney5@bloomberg.net.