Unions Win Key Concessions in Health Care Negotiations

The White House, congressional Democrats, and labor leaders announced an agreement on a key sticking point in health care reform negotiations: how to handle a new excise tax on so-called “Cadillac” insurance plans.

“The president is pleased with this agreement,” White House communications director Dan Pfeiffer said in a conference call with reporters. “The president’s overarching goal, as he’s said from the beginning…has been to bend the long term health cost curve,” and the health care reform legislation achieves that goal.

"We will endorse it and we'll do that proudly," said AFL-CIO President Richard Trumka of the emerging health-care deal. "We've been at this for 60 years and we are extremely proud of the constructive role that labor's played in advancing health care reform." Unions have long opposed such a tax, arguing that many of their members have accepted generous health insurance in lieu of wage increases in the past, and that the proposal – which in the Senate bill would impact family plans costing more than $23,000, and individual plans costing more than $8,500 – would be a harsh tax increase on their middle class members. (The threshold increases each year at the rate of inflation plus one percentage point.)

The White House and advocates of the tax say that it will help drive down health care costs, largely by encouraging companies to seek out less expensive plans. The Senate proposal would raise $150 billion in revenue to help pay for health care reform.

The new deal raises the threshold for plans considered “Cadillac” plans to $24,000 for families and $8,900 for individuals. Significantly, it exempts insurance plans that were part of state and local collective bargaining agreements – union members – until January 1, 2018. They call this a “transition period” in which unions and re-adjust the way they’ve negotiated wages and health insurance in agreements with employers.

In addition, there will be three exemptions allowing adjustments in the threshold:

• one for “unexpected” rises in health care costs beyond what is predicted between 2010 and 2013; • for various age and gender issues; • for high risk retirees and those in high-cost states.

In addition, insurance coverage for vision and dental are not taxable.

These changes to the Cadillac tax would end up shaving $60 billion off the $150 billion in revenue expected to be generated under the original proposal, meaning it would raise $90 billion.

“We don’t have an estimate from the Joint Committee on Taxation,” which is responsible for cost analyses, a senior administration official said. So the administration does not yet know how much this agreement will change the bill.

"It is appalling to me that this White House and union bosses have struck a back-room deal to strong arm the 90% of Americans who don't belong to unions into either pay more health care taxes or joining a union," said Rep. Kevin Brady, R-Texas, who said this “so-called deal punishes Texas and 21 other ‘right-to-work’ states.”


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