‘Cadillac tax’ key in Allegheny Technologies' lockout
August 19, 2015 12:00 AM
Several hundred Allegheny Technology workers and their families protest a lockout Monday in Midland, Beaver County.
The USW represents workers at Pittsburgh specialty metals producer Allegheny Technologies.
Several hundred Allegheny Technology workers and their families protest Monday in Midland, Butler County.
By Len Boselovic / Pittsburgh Post-Gazette
A provision of the Affordable Care Act, which is one reason Allegheny Technologies locked out more than 2,000 union workers last week at 12 plants in six states, also could be a stumbling block in negotiations involving two other major steel producers whose contracts covering about 30,000 union workers expire in less than two weeks.
The federal legislation subjects employers to a 40 percent tax if premiums for health care coverage exceed prescribed limits starting in 2018.
The tax was imposed to pay for the premium and cost-sharing subsidies, Medicaid expansion, and other provisions designed to make health care coverage more affordable for more people. It was dubbed the “Cadillac tax” because many believed it would apply only to gold-plated coverage provided to high-paid workers.
However, 48 percent of companies are likely to be subject to the tax in 2018 and 82 percent could be liable by 2023, according to benefits consultant Towers Watson.
“We’ve been calling it the ‘Chevy tax,’” said Anna Fendley, a legislative representative with the United Steelworkers union. “This is a tax that’s really falling on the backs of working people.”
The USW represents workers at Pittsburgh specialty metals producer Allegheny Technologies, where the labor agreement expired June 30. The union also represents workers at Pittsburgh-based U.S. Steel and at Arcelor Mittal, the world’s largest steel producer. Contracts covering USW workers at those companies’ U.S. sheet mills, iron ore mines and coke plants will expire Sept. 1.
The contracts being negotiated are expected to run through 2018, when the tax takes effect. Starting then, employers will have to pay 40 cents for every dollar that health care premiums exceed $10,200 for individual coverage and $27,500 for family coverage.
“I don’t think any of the companies will sign on for anything that is a Cadillac plan,” said metals industry analyst John Tumazos of Holmdel, N.J.
Company and employee contributions to the premium count toward the limit. The ceiling will increase annually, but only based on overall inflation. Since health care costs are increasing faster than the overall cost of living, many experts say more companies will be subject to the tax each year.
“The tax is going to hit everyone eventually,” said Karen Marlo, vice president of the National Business Group on Health, which represents more than 400 large U.S. employers.
She said that if employers have to pay the tax, it’s “a very real possibility” that employees will have to foot part of the bill.
Allegheny Technologies’ final contract proposal was a four-year deal that included a provision requiring new negotiations during the life of the agreement if the company projected escalating premiums would trigger the tax. At that point, the contract would be amended to prevent that from happening, according to a copy of the proposal on the USW website.
The specialty metals producer is taking measures that many other employers have used to avoid the tax, including switching to health plans that require workers to pay higher deductibles. USW-represented workers would see maximum out-of-pocket costs for those with family coverage jump from $3,000 in the first year of the contract to $6,000 in the final year, under the company’s proposal.
Part of the problem that employers have in coming up with a strategy for avoiding the tax is that the federal government is still developing rules for how to implement it.
In addition, there are efforts in Congress to repeal the tax. Legislation introduced by U.S. Rep. Joe Courtney, D-Conn., has more than 100 co-sponsors. His measure is backed by the USW and the U.S. Chamber of Commerce.
“It’s rare that we’re on the same page as the Chamber of Commerce on something,” Ms. Fendley said. “We’re very optimistic that Congress will do something about this tax.”
Len Boselovic: email@example.com or 412-263-1941.
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