News Release

Putting the Union Label on Health Benefits: Collective Bargaining and Cost-Saving Strategies

Unions Pursue Savings While Shielding Workers from Higher Out-of-Pocket Costs

With rising health care costs crowding out wage increases, some labor unions are pursuing cost-saving strategies that shield workers from higher out-of-pocket costs, according to a new qualitative study from the nonpartisan, nonprofit National Institute for Health Care Reform (NIHCR). Conducted for NIHCR by researchers at the former Center for Studying Health System Change (HSC), the study examined eight collectively bargained health benefit plans offered by both public and private employers, including Boeing, Pacific Gas & Electric Co., the Minnesota State Employee Group Insurance Plan, the Maine State Employee Health Commission and several Taft-Hartley trusts covering unionized workers.To reduce health care costs, the health benefit plans in the study adopted three main types of innovations: reducing unit prices by negotiating volume discounts or limiting provider networks; attempting to reduce utilization through improved care coordination, especially for patients with multiple, complex chronic conditions; and using wellness programs aimed at improving workers’ health and controlling longer-term costs.Compared to nonunionized workers, unionized workers tend to have more comprehensive health benefits, contribute less to premiums and face lower patient cost sharing. Over the last decade, many employers with nonunionized workforces have responded to rising health insurance premiums by shifting costs to workers through increased premium contributions, greater patient cost sharing and reduced benefits. For the most part, unions have resisted efforts to shift costs or reduce workers’ health benefits.

“While most union leaders understand the need to reduce health care spending, simply shifting costs to workers is usually a nonstarter, forcing both labor and management to pursue other ways to control costs,” said Amanda E. Lechner, M.P.P., a former HSC health policy analyst now at Mathematica Policy Research (MPR), and coauthor of the study with Kevin Draper, a former HSC research assistant now at MPR.

Collectively bargained health benefits are typically provided through employer-administered health plans. In some cases, unionized workers are covered through Taft-Hartley trusts that are jointly governed by management and labor representatives—collective bargaining in this type of plan focuses only on the size of the employer’s financial contribution for health benefits. In both cases, health benefits are included in contract negotiations along with wages and other benefits.

The study’s findings are detailed in a new NIHCR Research Brief—Putting the Union Label on Health Benefits: Collective Bargaining and Cost-Saving Strategiesavailable here.

Other Key findings include:

  • Reducing Unit Prices. Prices for health care services vary widely both across and within local markets, in part, because some providers have gained significant market power to command high prices from private purchasers. Collectively bargained plans in the study have adopted three innovations—negotiating volume discounts, reference pricing and limited-provider networks—to leverage patient volume against high-price providers.
  • Promoting Efficient Care Delivery. Several collectively bargained health benefit plans in the study adopted provider payment reforms, such as accountable care organizations (ACOs), that move away from fee-for-service payment and reward more efficient care delivery and potentially reduce utilization.
  • Improving Workers’ Health. Another common approach in collectively bargained health benefit plans is the adoption of wellness programs designed to improve workers’ health and reduce health care utilization in the long run. Generally, wellness programs include financial incentives to encourage activities like completing a health screening or taking smoking-cessation classes. Incentives include gift cards, premium reductions and reduced patient cost sharing.

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The National Institute for Health Care Reform (NIHCR) is a nonpartisan, nonprofit 501(c)(3) organization created by the International Union, UAW; Chrysler Group LLC; Ford Motor Company; and General Motors. Between 2009 and 2013, NIHCR contracted with the Center for Studying Health System Change (HSC) to conduct high-quality, objective research and policy analyses of the organization, financing and delivery of health care in the United States. HSC ceased operations on Dec. 31, 2013, after merging with Mathematica Policy Research, which assumed the HSC contract to complete NIHCR projects.