Editorial: UAW reaps what Obamacare sows

The Detroit News

The United Automobile Workers are up against a Cadillac different from the kind many of its members build.

Obamacare’s impending “Cadillac tax” on gold-plated healthcare plans pits the union against the signature law it helped pass.

The UAW is now faced with the angst that the Affordable Care Act has already caused many other Americans.

High-quality plans for as many as 135,000 auto workers are on the chopping block as contracts between the union and the Big Three are renegotiated over the coming months. The tax, a 40 percent premium on the annual cost of health care policies above $10,200 for an individual and $27,500 for a family, leaves automakers with little choice but to restructure benefits.

President Barack Obama sold the tax as a way to discourage “fancy plans that end up driving up costs.” But those fancy plans are a staple of union benefits and an attraction for new members, who are critical as union membership has steadily declined.

The automakers have recovered from the Great Recession, but their overall growth is not great enough to offset the punitive cost of this tax. So that means benefits will be on the bargaining table, with the companies pushing cuts to lower costs below the Obamacare threshold.

The Big Three will spend more than $2 billion on medical insurance coverage for workers this year, according to their numbers. UAW members pay between 6 and 8 percent of their medical costs, much less than the 20 percent average for American employees and less even than other workers in the manufacturing industry.

Fiat Chrysler Automobiles said it’s possible the new medical costs for hourly workers could exceed $16 per hour, which is more than the starting pay for a second-tier worker in the current system.

That’s unsustainable. Clearly changes will have to be made to current benefits, unless Obama gives the UAW a special exemption, which he has done already for other unions.

The automakers have signaled they’re willing to consider alternatives that would allow them to continue providing high quality coverage, even if it means shifting workers onto private exchanges. But that’s likely a temporary solution.

The UAW, employers and insurance companies will have to redesign plans to avoid the tax, which could means higher deductibles, higher copays, higher coinsurance, and the rest.

That’s going to be even harder for UAW workers to swallow if they don’t renegotiate the two-tier wage structure President Dennis Williams vowed to eliminate last week at the Special Bargaining Convention at Cobo Hall. The auto companies, still mindful of remaining globally competitive, are resisting givebacks.

Williams, who during the convention called on Obama to help strengthen the middle class by increasing the minimum wage, would be more effective for his workers if he lobbied the president to reopen the Affordable Care Act and rework the portions that are driving up costs for working families, including the Cadillac tax.