Unions, Democratic leaders and White House reach agreement on 'Cadillac' health insurance plans

Los Angeles Times: "The White House and labor leaders agreed Thursday on a formula to tax high-cost insurance plans, removing one of the last obstacles to President Obama's healthcare overhaul, officials said."  Organized labor had staunchly opposed the proposed "Cadillac" tax, but as part of the agreement, "reached after an intense round of negotiations this week, union leaders dropped their opposition ... in exchange for concessions to limit its scope." Under the compromise, the threshold for family plans subject to the tax would be increased from $23,000 to $24,000. The cost of dental and vision plans would be exempt. Based on the agreement, a 40% excise tax would be applied to "individual healthcare plans valued at $8,900 or more and family plans worth $24,000" (Hook and Levey, 1/15).

The New York Times: The "negotiations produced changes to a tax included in the bill passed by the Senate last month. The changes would lessen and delay the impact of the tax on workers and would reduce the amount of revenue collected. The revenue would help finance coverage for millions of people who are uninsured. Labor leaders hailed the deal and said they were prepared to fight for passage of the legislation." AFL-CIO President Richard L. Trumka said changes "would reduce the amount of revenue from the tax by about 40 percent, to $90 billion over 10 years. The tax in the Senate bill would have generated $149 billion over 10 years."

"The agreement has not been vetted by rank-and-file members of the Democratic caucus in either house of Congress. Nor has the Congressional Budget Office reviewed it. The proposed tax could be further modified based on feedback from lawmakers and the budget office" (Pear and Greenhouse, 1/14).

CongressDaily: "Senate language also is preserved that would raise the threshold for high-risk workers and allow plans in the 17 highest-cost states to hit a higher threshold that diminishes over time" (Edney, 1/14).

The Hill: "State and local government health plans and the plans of unions that are part of collective bargaining units would be shielded from the tax until Jan. 2018. The taxable threshold for health plans would be increased on the basis of age and gender — the tax on the plans of older workers and female workers would kick in at a higher cost than for average plans. … The taxable threshold for a family plan would be increased by $3,000 for each retiree in the plan not yet eligible for Medicare benefits. People between the ages of 55 and 64 who are not eligible for Medicare must pay high private insurance costs."

Unions sought to appear unified behind the agreement when it was announced during a conference call with reporters, which included representatives from the AFL-CIO, the American Federation of State, County and Municipal Employees and the National Education Association. "But there are some in the labor movement, including the International Association of Fire Fighters, who are not on board yet with the deal" (Bolton and Bogardus, 1/14).

McClatchy/The Miami Herald: The accord gives "collective bargaining units a five-year delay before they're subject to the excise tax. Over time, more Americans could get their insurance through a government-managed private insurance exchange, especially if they live in states with high insurance costs or participate in collective bargaining units. The aim, as union bosses see it, is to tax high-end health insurance plans carried by wealthy business executives while shielding middle-class workers who bargained away their salaries in exchange for high-end health-care coverage" (Lightman and Talev, 1/14).

USA Today: "The agreement on the controversial tax ... partly answered how lawmakers will pay for billions of dollars in subsidies that will help millions of uninsured Americans afford coverage." "White House communications director Dan Pfeiffer said the agreement represents an improvement because it makes needed adjustments for some employers and workers but still puts downward pressure on long-term health care costs, which Obama has insisted on" (Fritze, 1/15).

Politico reports that for "a day at least, the White House could claim a significant victory on the road toward passing a health care reform bill, with a deal that averts a standoff on one of the most contentious issues standing in the way of a final compromise. … 'We will endorse it, and we'll do that proudly,' said (Trumka) of the health care bill, assuming it stays true to negotiations. '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'" (Budoff Brown, 1/14).

The Wall Street Journal reports on the dissent from Republicans and some business groups. "J.P. Fielder, a spokesman for the U.S. Chamber of Commerce, said that like the unions, the business community didn't like the tax and supported scaling it back. But he said it seemed unfair for unionized workers to be exempted for five years when others were not." Annual increases on the excise tax threshold will be tied to one point above the Consumer Price Index or further if health costs rise at a faster rate between now and 2013, officials said (Meckler and Bendavid, 1/15).