Health Plan Tax Resolved?

Consumers worried about the rumor of taxes on high-value health insurance plans, the so-called “Cadillac” plans, can rest easy. Why? Because the White House and union leaders reached an accord two weeks ago which changed the cost threshold and added an eight-year exemption for collectively bargained plans.

The deal, which was cemented in mid-January, removed one of the major issues causing friction between the House and Senate.

The final bargain raises cost levels to $8,900 from $8,500 for individuals and to $24,000 from $23,000 for families. Union plans would have an exemption from the tax until 2018. Additionally, dental and vision benefits would be excluded from being part of the total cost beginning in 2005, and the threshold would be adjusted to account for age and gender.

“It’s subject to the final bill,” said Richard Trumka, president of the AFL-CIO, who added that the concessions were tough-won. He also felt that they would move the unions toward an official endorsement of a merged health reform bill.

The move does come at a price, however. The original Senate proposal would have raised almost $150 billion over ten years. With the negotiated changes, the measure will only raise $90 billion, making it necessary for lawmakers to find other sources of revenue to make up for that loss. One idea is an extension of the Medicare tax to include capital gains earnings.

House Democrats have always maintained that they were wary of the Senate’s measure, saying that middle-class workers would be affected, but wealthier ones would not.

Rep. Joe Courtney (D-Conn.) has always been very critical of the tax, and has not yet endorsed the deal, telling reporters only, “It’s too soon to say.”