President's Corner

April 2018 Healthcare Costs Expected to Spike

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President’s Corner

Brothers and Sisters,

At the end of February, we wrapped up our third open enrollment period for the Midwest Operating Engineers Health Plan Marketplace. Since we transitioned our healthcare system for active hourly members more three years ago, we’ve provided trained staff and various resources to help members choose the most appropriate and affordable plans for themselves and their families.

One of the most interesting trends we’ve identified since the first open enrollment period is the declining number of members who are selecting Plan A, which is the most comprehensive (and most costly) plan option that is available. Prior to the development of the Marketplace, this was our “one size fits all” healthcare plan, and the associated costs were a central driver of our efforts to change how we provide healthcare. In 2016, 85 percent of members selected Plan A, and that number was 77 percent this year. This shift to other plans is the result of several trends, but the main reason is affordability.

Ensuring that members have access to affordable options for strong healthcare coverage has always been a priority for the leaders of this union, and the Officers and Trustees put a great deal of time and effort into finding creative ways to keep costs down. The problem for all of us, however, is that the cost of healthcare across the nation is about to skyrocket once again, and if what the bright minds of the industry are projecting is accurate, negotiating for healthcare will become far more challenging in the next few years.

The Affordable Care Act, generally referred to as Obamacare, was not the solution that America’s broken healthcare system needed. Taxes and fees were imposed that targeted funds like ours, which provide high-end healthcare. Think about that for a moment—the bill that sought to expand quality coverage for the uninsured paid for itself partly by penalizing organizations that provided quality coverage. If that doesn’t make sense to you, it’s because it just doesn’t make sense. By giving employers and the uninsured the option to pay a small penalty instead of providing coverage for employees or purchasing it for themselves, Obamacare ensured that those who did purchase healthcare were those who were older, sicker, or otherwise more likely to use it. That made it hard for insurers to stay competitive and it is a large reason that many insurers ran from the exchanges.

Still, despite its flaws, Obamacare did slow the cost inflation trends that were so troubling in the years before it was passed. In 2007, healthcare costs were rising by an almost unimaginable 11.9 percent per year. Because Obamacare did increase the number of covered Americans, that inflation was down to 6 percent in 2017. Remember that the inflationary rate is what we need to negotiate into our contracts to maintain the same coverage options. For example, if a contract that is putting $13 per hour into healthcare has to keep up with 10 percent inflation, that means the union must allocate $1.30 just for healthcare that next year. Of course, the problem compounds every year, and you can imagine the response from employers at the bargaining table.

We went on strike in Illinois in 2010 and in Indiana in 2011 just to protect our healthcare, and we didn’t put money into wages on our master agreements because it all had to go to benefits. That is not a position that we want the union or its members to be in.

Our actuaries and consultants are predicting a 9 percent increase in healthcare costs this year, and that increases of 10 percent or more are likely in following years. This trend is completely unsustainable and troubling for the future of healthcare in this country. I can tell you that I, as well as the other Officers, have lost sleep watching this unfold. The question everyone should be asking is “why?”, and the answer is inexcusable: Washington politics. If our Congressmen and Senators can’t figure out a better plan quickly, we are headed for a situation that is far worse that the one we were in before Obamacare.

For about the past eight years, Republicans in Washington have tried incessantly to repeal Obamacare, and every 2016 Republican Presidential candidate promised to do it on his or her first day in office. When Donald Trump won, it was immediately clear to him that a repeal would mean taking away some very popular benefits from the American people. From coverage for pre-existing conditions to reduced costs for newborn care and increased prescription coverage, even Americans who hated the idea of Obamacare really liked some of its pieces, and were not about to give them up.

Several plans were put up and shot down by Congress and the President in an effort to say that the promise of repeal was fulfilled. When they had the power to put down their boogeyman, Republicans realized that the plan they had denounced for almost a decade was far more popular than they thought.

Their plans suggested raising costs for older Americans by as much as five times as much as younger, healthier people. They called for eliminating funding for Medicaid, which covers poor Americans. They eliminated coverage for preventive care, which slows the development of chronic diseases that are far more costly to treat. For those of you who remember the “Better Care Act” that John McCain torpedoed with his dramatic “thumbs down” vote on the Senate floor, if it had passed, the Congressional Budget Office (CBO) estimated that 16 million people would have been left uninsured and premiums would have risen by 20 percent.

All the Republican plans were terrible for coverage and cost reduction, but President Trump’s solution is even worse. When he told Americans he would simply “let Obamacare die” by cutting funding, people cheered without the slightest idea of what it means for healthcare costs. The “let it die” approach is the most irresponsible move imaginable, but the idea behind it is that if the systems breaks down enough, Americans will accept realities that we otherwise never would.

The first move was Trump’s elimination of the “individual mandate,” which requires workers to either purchase coverage or pay a penalty. That penalty was a small but important funding source, and it encouraged some people to purchase coverage. Without it, individuals have no reason to purchase insurance, and the CBO estimates that 13 million currently-insured Americans will not be insured next year. The people who do stay insured will be those likely to be sick, which raises costs. Those who don’t purchase insurance still get sick, and when they can’t afford the massive undiscounted costs, who are those costs shifted to? That’s right, folks – us.

Trump’s budget proposal calls for massive cuts to Medicaid, which is now deemed an unaffordable program after the tax cuts that Congress recently passed. If you think this doesn’t affect you, you’re wrong. Doctors who treat Medicaid patients are typically reimbursed at a rate just above the hospital’s actual cost to provide services, and that rate is always being chipped away. To give you some context, our Blue Cross Blue Shield network discount generally leaves us to pay double or triple the true cost of the services. As for the “retail” costs charged to the uninsured, there is almost no limit. So when doctors and hospitals bring in less money for covering Medicaid patients, they are forced to make up those losses by raising prices for insurance companies, who shift the cost to us. The same goes for Medicare. When you hear about cutting funding for “entitlements” like Medicare and Medicaid, recognize that it hurts you right now, even if you have never seen a dime from either program.

Subsidies for low-income insurance purchasers are also going the way of the dinosaur, which makes the price of coverage completely unaffordable for them. So once again, when they get sick and can’t pay, the cost gets passed to insurance companies, and on down the line to us. If you think it’s a pretty raw deal, I’d agree with you. When you hear the President say he is going to “let Obamacare die,” don’t smile, because now you know that it means your insurance is going to cost more.

This is the reality we are facing as we look ahead to master agreement negotiations in District 4 and dozens of shops and municipalities. If Obamacare was a bike with one flat tire, President Trump and Congress just ran it over with a garbage truck, and we are left to figure out how to stay healthy without going broke.

This situation is going to have a few years to either correct itself or completely collapse before we go back to bargain most of our master agreements. If we do return to double-digit inflation rates, it won’t be long before we are back on the streets over healthcare costs. That is not in any of our best interests, and the Officers will continue to do whatever is necessary to maintain our coverage in some pretty uncertain times.

What can you do in the meantime? This is an election year, so when you get lists of endorsed candidates from the union, drag everyone you know to the polls and vote accordingly.

United We Stand, Divided We Fall.