What may an employer do about health coverage that ends because of a union’s acts?

[Peter Gulia]

I’d like to know what BenefitsLink mavens think about the following hypothetical snafu:

For decades, an employer’s collective-bargaining agreements provided for contributions to a multiemployer health plan tied to the union local. (Although in formal terms the plan has two slates of trustees – elected from employers and from the union, in practical operation the union local’s staff runs the plan; and the union local’s chief makes the plan’s coverage-buying and management decisions.) For decades, the employer has regularly paid contributions to the local health plan.

In the most recent collective bargaining two years ago, the parties bargained to impasse. The employees have continued to work. The employer has continued to meet all obligations that it agreed to in the incomplete collective bargaining along with all obligations of the expired collective-bargaining agreement that were not displaced. Among these obligations, the employer has continued to pay its contributions to the local health plan.

Several months AFTER the collective bargaining ended, without the employer’s consent or involvement, the local health plan arranged to get coverage from a national multiemployer health plan. The employer signed nothing. All enrollment forms were signed only by the employee, with nothing written by the employer. Although some employees pay contributions (if the “premium” for his or her coverage is more than the amount that the employer is obligated to pay), the employer has no involvement concerning those payments. The employer has never agreed to a dues check-off or wage deduction for any purpose.

After the local health plan switched coverage, the union local’s agent requested a few times that the employer sign the national health plan’s participation agreement. The employer declined to do this. The employer believes that it never agreed to become a participating employer under the national health plan, and that it never agreed to do anything other than pay an amount of money to the local health plan.

This absence of a participation agreement now seems to be at a boiling point. The national health plan has informed the local health plan that, if the desired participation agreement is not received by a due date that the letter specifies, the national health plan will end coverage for the employer’s employees (and their spouses and dependents).

If it matters to our thinking, the documents of the national multiemployer health plan make clear that the plan is not insurance. (Although to participants the plan looks like mainstream PPO health insurance with big insurers, those insurance companies provide only administrative services.) The local multiemployer health plan’s most recent Form 5500 reported the plan’s arrangement with the national plan as though the arrangement were insurance. Its preceding year’s Form 5500 reported that the plan bought coverage from a health maintenance organization.

If the national health plan ends its coverage, am I right in guessing that the national health plan does not provide COBRA continuation coverage because the loss of coverage would not have resulted from a termination of employment or reduction in hours? Assume that the employees continue to work at least full time and work all regularly scheduled shifts.

If the local health plan ends its coverage, is it likewise so that the local health plan does not provide COBRA continuation coverage?

The employer’s obligation to pay contributions to the local health plan was grounded on a natural understanding that the local health plan would provide coverage to the employer’s employees. If the employer knows that coverage is not provided, must the employer nonetheless continue to pay its contributions?

Assuming that the national plan’s fiduciaries lacked express knowledge that a group of employees had been enrolled despite the absence of the employer’s participation agreement, do the fiduciaries have any responsibility for suddenly ending coverage after having allowed the situation to continue for a year and a half?

If, because of these circumstances, an employee lacks any health coverage and has an expensive hospitalization, could the employer or the union local be liable for those uncovered expenses?

Does the employer have any legal responsibility to help its employees get health coverage?

The employer might feel a moral responsibility to help its employees get other health coverage if the employer can do so without violating any law. If the employer wants to help its employees get coverage through means other than multiemployer health plans, is there anything that the employer can do? Or does labor-relations law preclude the employer from communicating with the employees other than through their bargaining representative?

[Chaz]

Most of your questions fall in the area of traditional labor law, of which I am unqualified to answer but I can say that, if the loss of coverage is solely due to the termination of the plan's coverage, there is no qualifying event and thus no required COBRA coverage.

I do have a questions though. You write:

If it matters to our thinking, the documents of the national multiemployer health plan make clear that the plan is not insurance. (Although to participants the plan looks like mainstream PPO health insurance with big insurers, those insurance companies provide only administrative services.) The local multiemployer health plan’s most recent Form 5500 reported the plan’s arrangement with the national plan as though the arrangement were insurance. Its preceding year’s Form 5500 reported that the plan bought coverage from a health maintenance organization.

What do you mean that the "plan is not insurance"?

[david rigby]

My guess is that he means "medical benefits" rather than "medical insurance". To my limited understanding, this is similar to the difference between "self-insured" vs. "insured". In the latter case, state insurance laws are relevant.

A few other non-attorney thoughts:

- You state "bargained to impasse". Is this the same as saying "no CBA exists"? If so, did the ER have any valid position to continue paying to the llocal health plan? If not, is there a solution by going back to that point in time?

- If no CBA exists, and the ER wants to make sure its EEs have some coverage, is there anything prohibiting the ER from unilaterally purchasing insurance or otherwise contracting with a PPO? (Even if the answer is yes, this will likely leave some recent terminations out of COBRA coverage.)

[Peter Gulia]

Chaz and David Rigby, thank you for helping me think this through.

The national multiemployer health plan is "self-insured" - that is, the plan pays benefits from the plan's assets without regard to an insurance contract.

My dim understanding of labor-relations law is that when bargaining parties do not agree enough to conclude a written collective-bargaining agreement they may nonetheless put into operation those terms (if any) that the parties agreed on and the employer's last offer.

In the hypothetical circumstances, the employer believes that it was and is obligated to contribute to the LOCAL health plan at rates ageed in a written memorandum of understanding.