SEIU Strikes at Providence St. Peter: Unions and Employers Jockey for Position in Advance of Key Affordable Care Act Changes

by BakerHostetler

Recently, employees represented by the Service Employees International Union (SEIU) went on strike at Providence St. Peter Hospital (P.S.P. Hospital) in Olympia, Washington. According to information released by SEIU, the employees were protesting changes that had been made to the healthcare plan being offered by P.S.P. Hospital after their bargaining agreement had expired, including the introduction of substantially higher employee deductibles. According to SEIU-generated material, P.S.P. Hospital is trying to use the changes now being mandated by the Affordable Care Act (ACA) as an excuse to increase its employees' share of the coverage costs.

While the SEIU-led strike against P.S.P. Hospital was short-lived, the strike is a cautionary tale for all hospital employers now grappling with the many changes mandated by the ACA, particularly since the most economically significant ACA changes are scheduled to take effect January 1, 2014. As P.S.P. Hospital's experience indicates, hospital employers are not immune from these changes or these problems. Indeed, it may be more important for hospital employers to develop and implement a strategy which deals effectively with their ACA-related "employer" responsibilities because of all the other economic pressures hospitals face as healthcare providers under the ACA.

As hospital employers look to make a variety of changes to their healthcare plans to comply with the ACA, they need to take into account both the perception and the reality of what they are doing. Those that employ unionized employees should keep in mind not only their legal obligation to bargain first with the employees' representatives, as required by the National Labor Relations Act (NLRA), before making any ACA-mandated changes (unless they clearly have reserved to themselves already the right to unilaterally make them), but also how the union may spin things. Additionally, those hospitals that employ nonunion employees have to consider whether the actions they take to comply with the ACA can be used as fodder for union organizing drives.

What follows is a brief discussion of some of the issues that all hospital employers should take into account if they have unionized employees or consider themselves vulnerable to union-organizing activity, as well as strategies such hospitals might consider using to address those issues.

Changes in Coverage

The ACA creates powerful incentives for employers to take steps now to reduce their overall healthcare plan costs before the ACA's new coverage mandate takes effect on January 1, 2014. Because health insurance is a mandatory subject of bargaining under the NLRA, virtually all changes that affect employees' out-of-pocket costs, such as higher deductibles or copays, are subjects that have to be negotiated in good faith before an employer implements them. Virtually all "pocketbook" issues fall into this mandatory subject category.

Changes in deductibles or copays can create real economic hardship for lower income employees (which was SEIU's contention at P.S.P. Hospital). Changes in provider networks, which can reduce costs (and premiums) also can create employee anxiety and nightmares for the unwary employer because these network changes can turn into pocketbook issues. For example, an employee who faces chemotherapy and then discovers that his or her treating physician has become an out-of-network provider or that his or her local hospital no longer is an in-network hospital will consider that change a pocketbook change.

Hospital employers that contemplate making changes are well advised to know where these minefields are hidden. Even if an employer can and does retract a poorly received decision, employee dissatisfaction typically remains. Therefore, it is important for any employer, including a hospital employer, to know how many employees and dependents are likely to be affected by any coverage changes it might consider and to have alternatives or solutions to offer in the event such changes turn out to be (or are perceived to be) pocketbook issues.

Determining Who is Part-Time

Another problem hospital employers face, particularly with unionized employees, is that the ACA requires most employers to offer comprehensive coverage to all their full-time employees, and the ACA has a unique definition of the term "full-time employee."

This can be problematic. Most collective bargaining agreements that cover both full-time employees and part-time employees define, as a matter of contract, who qualifies as a full-time employee; that contractual definition is then used for a variety of compensation and benefits purposes. Additionally, many hospital employers do not provide, or even offer, healthcare plan coverage to part-time employees, even those covered by a collective bargaining agreement. Thus, one can easily see where a hospital employer's contractual commitments could conflict with its statutory commitments.

One way hospital employers could address this new ACA-driven part-time employee problem would be to negotiate for the management right to establish an hours measurement protocol for part-time employees, which would apply only for healthcare plan coverage purposes. By so doing, an employer could retain the right to at least offer coverage to someone who otherwise would be considered a part-time employee under the collective bargaining agreement, and thereby comply with the ACA, without being accused of making unilateral bargaining agreement changes and without having to lower the "full-time" bar generally for all of the employees covered by the bargaining agreement for all compensation and benefits purposes.

Concern Over Co-employment

Another concern has to do with staffing. Many hospitals rely on "registry" employees (a form of employee staffing/leasing which is well known within the healthcare industry) to hold down labor costs while preserving scheduling flexibility. The staffing companies that maintain registries often do not provide health coverage for the registry employees they make available to their client-hospitals.

The ACA's newly imposed "employer mandate," which requires every large employer to offer comprehensive coverage to all its full-time employees, inevitably forces both staffing companies and the hospitals they serve to answer what frequently is a provocative question: who is the real "employer" of those who serve as registry employees? Depending on how the ACA comes to be implemented, there are two possible alternatives to be certain the "employer" responsibility under the ACA is discharged no matter who the real employer turns out to be. First, hospital employers may well have to offer "their" registry employees healthcare plan coverage. Alternatively, hospital employers would have to make clear in the contractual arrangements they make with the staffing company operating the registry that it falls to the staffing company to offer the registry employees healthcare plan coverage.

This, too, would increase labor costs. More importantly though, unions may not want to horse trade with hospital employers over the increased labor costs being generated by providing coverage for unrepresented employees. One strategy to address this issue would be to change the contracts with the companies providing registry employees, to ensure the hospitals are not left to absorb these costs. Hospital employers also may want to consider making offers of coverage to registry employees on an unsubsidized basis so that the most critical ACA obligations are discharged.


The key take-away? Hospitals need to anticipate the challenges they face as healthcare employers in addition to taking into account all the changes they face as healthcare providers. Obtaining timely and competent advice from counsel knowledgeable in labor relations and the ACA will be important to devising an effective strategy to implement the ACA without encountering labor disruption and/or without creating fertile terrain for union organizing.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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