California aims to maximize health insurance subsidies for workers during labor disputes

This spring, Chevron workers testified that the company canceled health insurance for hundreds of United Steelworkers Local 5 members at the Richmond, Calif., refinery during a strike that ended up lasting two months. Thousands of nurses at Stanford Health Care were told in April they would lose their health insurance if they did not return to work during their weeklong strike. More than 300 workers at Sequoia Hospital in Redwood City received a similar message after going on strike in mid-July as contract negotiations stalled.

Freezing health insurance benefits is a common tactic in labor disputes because without them, workers could be more easily persuaded to acquiesce to management’s demands. But California lawmakers are giving the strikers the upper hand.

Assemblyman Jim Wood, a Democrat, hopes a new California law he authored will discourage employers from withholding health benefits during labor disputes by allowing private sector workers to maximize state subsidies for coverage purchased through Covered California , the state’s health insurance marketplace. The bill, which takes effect in July, was sponsored by the California Federation of Labor, the California Teamsters Public Affairs Council and the Los Angeles County Federation of Labor.

“The point of the legislation is to say, ‘No, you can’t do that,'” Wood said. “Never try that again.”

Eligible workers’ premiums will be covered as if their income were just above the Medicaid eligibility level, according to Covered California spokeswoman Kelly Green. The state will plug in the worker’s federal subsidy and cover the difference. For example, a person making $54,360 a year could pay 8.5% of their income, or about $385 a month, in premiums for an average health plan. Under the new law for striking workers, that person who chose the same plan would pay no premiums — as if that person were making $20,385 a year — for the duration of the strike.

The federal government authorized an increased subsidy under the American Rescue Plan Act. The increased subsidy will continue through 2025 under the Inflation Reduction Act. The state’s share of the subsidy could increase after the federal stimulus ends.

One estimate the unions shared with the state suggested the law would cost California an average of $341 a month per worker — with strikes lasting one to two months. Professional organizations estimate the bill would affect fewer than 5,000 workers a year. California has nearly 15 million private sector workers, and strikes are usually the last resort in labor negotiations.

It is not clear how the business will react. Chevron, Stanford Health Care and Sequoia Hospital’s operator, Dignity Health, did not respond to requests for comment. The bill faced no formal opposition from business or taxpayer groups. California’s covered subsidies are provided by a combination of federal and state funds as part of the Affordable Care Act, so there is no direct cost to businesses.

Last year, Gov. Gavin Newsom, a Democrat, signed the Public Employee Health Protection Act, which prohibits public employers from cutting health insurance during an authorized strike. The new law for private industry is different: There is no ban on – or financial penalty for – withdrawing health care benefits during a strike.

Nationally, House and Senate Democrats pushed for an outright ban on the practice, but neither bill made it out of committee.

When California workers lose their employer-sponsored health benefits, they can become eligible for the state’s Medicaid program, known as Medi-Cal, or qualify to purchase health insurance through Covered California. With the latter option, workers could receive a range of subsidies to help pay their monthly premiums. In general, the lower the household income, the larger the subsidy.

But even when workers are eligible for Covered California, that insurance can be far more expensive than the plans they had while on the job — sometimes taking 30 percent to 40 percent of their income, supporters said. And striking workers may experience delays, as coverage may not take effect until next month.

“That’s one of the downsides of a health care system that’s tied to employment,” said Laurel Lucia, director of the health care program at UC Berkeley’s Labor Center. “We saw during the pandemic when there were furloughs or layoffs, people lost job-based coverage when they needed it most.”

Sequoia’s striking workers reached a settlement with Dignity Health and returned to the 208-bed facility before the health insurance cut off Aug. 1, but some said they might have stayed on the line longer if not for fear of losing their aid.

“It was pretty scary,” said Mele Rosiles, a registered nurse and member of the union’s negotiating team, who was pregnant at the time. “The majority of our workers felt threatened by this move by our employer to take away our family’s health insurance if we did not return to work.”

The California Association of Health Plans raised concerns about an early version of the bill that sought to create a category for striking workers, but the industry group dropped its opposition after it was determined that Covered California could administer the change without it.

Covered California estimates it will spend about $1.4 million to launch this benefit. The agency said it will create application questions to verify if eligible workers and remind them to stop coverage once they return to work.

This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

This article was reprinted from with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health policy research organization not affiliated with Kaiser Permanente.

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