Why the SEIU Wants Health Reform

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WASHINGTON--The largest health care labor union in the United States, the Service Employees International, is using its 2.2 million members' hard-earned dues to finance an intense, expensive lobbying campaign in support of the pending health-insurance bill - in order to prop up its failing pension plans.

It spent a significant fraction of its 2009 lobbying budget of $2.7 million on health, purchasing costly ads in major newspapers and on TV, such as one telling Indiana Representative Brad Ellsworth, a Democrat, "to keep standing up for us, not the insurance companies. Pass health insurance reform now."

The union's president, Andy Stern, who is desperately committed to enactment of the bill, is reported to have been the most frequent visitor to the White House over the past year.

The union's Web home page features "The Final Push for Health Care" and urges union members to phone their members of Congress in support of health "reform." The Web site coaches union members on what to tell Congressional staff and even offers a telephone number that will connect union members to their representatives in Congress.

In contrast, the Labor Department's Web site lists pension plans that are in financial difficulty. Several SEIU pension plans are in critical status, meaning they have less than 65% of assets needed to fund financial obligations to future and current retirees, or in endangered status, with less than 80% of needed assets.

What's the connection? The SEIU needs more new dues-paying members to pay for the retirement of current members if it is to rescue its pension plans from subpar performance. It's a Ponzi scheme that would make Bernie Madoff proud. With many of its members employed in health care, the union believes - not illogically - that if more Americans have health insurance, the demand for health care will expand and so will employment in the health sector.

The Senate is unlikely to pass the Employee Free Choice Act, a bill that would impose mandatory arbitration and take away workers' right to a secret ballot in union representation elections. This was first on unions' 2009-10 wish list, and union leaders want to show that they still have political power. So they will settle instead for the health care "reform" bill.

More than flexing labor's political muscles, the overriding reason for SEIU support of health care reform is that it would bring in more members. The percentage of private sector workers belonging to unions has been declining steadily, and reached 7.2% in 2009. Partially offsetting this is the percentage of unionized government workers, 37% last year, up half a percentage point from 2008.

And without more members, the SEIU's troubled pension funds will continue to fall short of 80% funding, considered by the Labor Department to be acceptable financial coverage.

Even before the stock market crash of 2008-09, the SEIU's 1199SEIU Greater New York Pension Fund was funded at 58% for 2007. The Service Employees 32BJ North Pension Fund stood at 68%; the Local 32BJ Building Maintenance Contractors Association Pension Plan at 41%; and the 32BJ District Building Operators Pension Trust Fund at 56%.

These worker funds are all in critical or endangered status. Yet Andy Stern's SEIU Affiliates Officers and Employees Pension Plan, funded at 102% in 2007, is not in trouble.

The SEIU is hiding these difficulties from its members by misstating the facts. At the same time as its pension funds are listed in critical condition by the Labor Department, the SEIU declares on its pension fund Web page that "the 1199SEIU Funds are among the strongest and largest labor-management funds in the nation, providing a range of comprehensive benefits to 400,000 working and retired healthcare industry workers."

Successful lobbying for health-care reform would expand the health centers available for unionization, driving up costs. The SEIU now represents employees of many providers, including Kaiser Permanente, The League of Voluntary Hospitals and Homes of New York, Tenet Healthcare Corporation, and Dominion Hope. Such providers presumably would expand payroll if 30 million uninsured were covered, with new members required to join the SEIU.

The SEIU also organizes home health care workers, who would gain from the passage of comprehensive insurance.

Furthermore, the Senate bill's insurance scheme, if enacted and not later amended, is unsustainable and likely to lead to a government takeover, leaving us with a Canadian-style single-payer system. The price of plans, already averaging $4,824 for singles and $13,375 for a family, would increase steadily as people chose to pay the $750 fine rather than purchase insurance. With insurance companies required to take everyone, there would be no penalty for waiting to sign up when sick. The pool of insured Americans would get sicker, driving up premiums, and leading to more uninsured with Uncle Sam eventually stepping in.

In a single-payer system unions have far more power to raise costs. According to Brian Lee Crowley, Senior Fellow of the Atlantic Institute for Market Studies in Nova Scotia, "So what happens when you put together a public sector monopoly service like health care...without a hard budget constraint, together with a powerful rent-seeking public sector union? You get hugely increased bargaining power for the public sector union compared to its private sector counterparts. "

Even as unions might drive up the price of care, they would be shielded from the premium increases, because the Senate bill would exempt organized labor from the so-called "Cadillac" excise tax on expensive plans.

The SEIU, driven by the need to prop up its weak financial organization, is using the hard-earned dues of its low-income members, all of whom receive health insurance, to lobby Congress to pass the health reform bill. No wonder that Americans are cynical.

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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