Frenier: Giving up your Cadillac means giving up your Cadillac

Carol Frenier

Democrats who voted for the ACA (Obamacare) felt it was unfair that some people could get their employers to foot the bill for a “Cadillac” health insurance policy and never even pay taxes on it. Other people, mostly in low paying or non-existent jobs, got less coverage and paid more. So, in the name of fairness, the ACA imposes a rather large penalty on any existing Cadillac policies effective in 2018.

These Cadillac policies include the ones Vermont teachers have enjoyed until this year. It surprises me that, in the debate over saving $26 million by shifting teachers health care insurance negotiations to the state level, there is so little discussion about the principle of fairness that is behind imposing penalties on Cadillac insurance policies in the first place. How does that principle apply to the current debate?

Restructuring our health care system to increase access and reduce inequality is a great idea, but you have to accept the economic consequences. If you increase services for those who can’t afford them, those services have to be paid for somehow. One popular solution is for those with more to pay more.  For many supporters of the ACA and Governor Shumlin’s single payer proposal, the assumption was that only the rich (however that is defined) would pay more to cover the extra costs. Unfortunately the rich do not have anywhere near the resources that middle class people think they have, so it was inevitable that people who do not consider themselves well off would end up having to pay more.

The reality is just now coming home to the teachers that their Cadillac policies are expiring and can’t be replaced without substantial penalty. Fortunately for the teachers, Governor Scott has come up with a plan that will fund Health Savings Accounts for them, essentially holding teachers harmless by paying the higher deductibles in the new “non-Cadillac” plans.

One could reasonably ask if this is fair, given that many of their private sector neighbors have, for a number of years, paid not only higher premiums but very stiff out-of-pocket deductibles. No state fund was available to offset these increases in costs imposed on private sector employees by both the ACA and the Vermont mandate that individuals and small businesses go through the dysfunctional Health Connect.  

From the non-teacher taxpayer point of view, teachers are very lucky. Under the governor’s plan, they may face some increases in the percentage they have to pay for their premiums, but they won’t have to absorb the dramatic out-of-pocket deductibles that most of the rest of us had to absorb. 

Still the union wants to retain local negotiations. They are holding out the hope that they can swap some of the savings on health care benefits for salary increases. They probably can be successful with this, because local school boards are routinely outgunned by the union. In a letter to legislators this week, one local school board member described the situation this way. “With financial resources in excess of $5 million,” the VT NEA (teachers union) has a staff “consisting of 7 regional reps, 2 full time attorneys, a benefits specialist, a public relations manager and several full time lobbyists,” he reports. “The regional directors work with all of the bargaining units in their area. At frequent dinner meetings, they share information between schools and they orchestrate responses and settlements. In almost every round of negotiations, our teachers and support staff have referenced settlements in other school districts that hadn’t been announced or even ratified. …. It’s clear to me that the VT NEA is already negotiating at the state level—the party that isn’t—and legally can’t—are local school boards.”

What right do teachers have to any health care insurance savings if the governor’s plan will already hold them harmless?  They are not giving anything up; in fact, it’s arguable they really haven’t lost the “Cadillac” quality of their plans at all.

The only thing teachers can do to help equalize their situation with that of their private sector neighbors is give Governor Scott the leverage he needs. They can publicly side with their fellow taxpayers by asking their union to stand down, to let Governor Scott pursue state-wide negotiations for health care insurance and the likely savings such negotiations would produce.

One thought on “Frenier: Giving up your Cadillac means giving up your Cadillac

  1. Carol is right on, and she is former teacher. This standoff has brought the truth to the surface: the VTNEA runs the state, through the legislature’s Democratic majority and by outgunning the school boards locally.

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