Policy-ish

Democrats Downsize Cadillac Tax To Cement Union Support For Overhaul

After spending months playing hard to get, and spending quality time holed up at the White House for days, the unions seem ready to say yes to President Obama's health care bill.

Richard Trumka, President of the AFL-CIO. i i

hide captionAFL-CIO President Richard Trumka, shown at a briefing on January 11, is one of the labor leaders who got concessions from Democrats on taxes of high-end health plans.

Mark Wilson/Getty Images
Richard Trumka, President of the AFL-CIO.

AFL-CIO President Richard Trumka, shown at a briefing on January 11, is one of the labor leaders who got concessions from Democrats on taxes of high-end health plans.

Mark Wilson/Getty Images

"If continued improvements are made, then we will," says Richard Trumka, president of AFL-CIO, on a conference call with reporters late this afternoon.

That's because labor leaders tonight announced a tentative agreement with the White House and Congressional leaders that would scale back the so-called Cadillac tax imposed on high-cost health plan. Plus, a few other goodies they've been seeking. The tax has been a sore point of negotiation for weeks.

The deets, according to Trumka:

  • The threshold for families that would be hit by the Cadillac tax is raised from plans costing $23,000 to $24,000, starting in 2013, with proportional increases for individuals in high-cost individual plans;
  • Health care inflation costs taken into account;
  • Adjustments for high-cost plans in companies that have large numbers of women or older people, whose plans tend to cost more even if they offer no additional benefits;
  • Allow collectively bargained plans to participate in the health insurance exchange, starting in 2018; and
  • No state and local employee plans, nor plans in collective bargain negotiations, would be subject to the tax until 2018.

The unions, and in particular, the AFL-CIO, have been complaining loudly about a proposal to subject family plans costing more than $23,000 for a family of four to a 40 percent tax.

The tax would be imposed on the plans themselves, but workers with these generous plans feel they might be the ones paying the bill. The concern of union workers is that they've given up wages in many cases to get better health care, and they fear they will not get those wages back.

But Obama and company support the tax because they see it as a deterrent for companies to offer such expensive plans that potentially waste health care dollars.

The trade off for Obama might be shoring up support for an important constituency, but with these proposed changes, the savings will be only $90 billion over a decade—$60 billion less than originally expected.

There's still a long way to go before a health bill is signed into law — other tax questions, subsidy values, illegal immigrant coverage and abortion restriction issues are still out there, but Trumka says this is a "step along the way in a quest for real reform."

Trumka dismissed criticisms already coming from Republican quarters that most of the benefits they negotiated would be primarily for union members. "We increase the threshold for everybody out there," Trumka says.

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