Unions Pressure Democrats On Health Insurance Tax

Much of the health care debate in the Senate has so far focused only on a few issues: Medicare, abortion and a government-sponsored public option. Union members on Thursday tried get lawmakers to focus on their top issue: opposition to a tax on high-cost health plans.

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As the Senate tries to work out a health care overhaul, it faces a constant balances act between competing interests. Yesterday, union members were trying to get the attention of lawmakers. Their issue: opposition to a proposed tax on expensive health plans. NPR's Julie Rovner has more.

JULIE ROVNER: The union members held their event in the cold December wind outside the Capitol, raising their voices as if to underscore the fact that they've struggled so far to be heard in the clamor over the health overhaul bill. Larry Cohen, president of the Communications Workers of America, urged senators get rid of the bill's tax on so-called Cadillac health plans.

Mr. LARRY COHEN (Communications Workers of America): There's five other ways in the Senate and House bills to pay for health care in a fair way. There's only one way that's unfair and that's this excise tax that will break the backs of the health care for 30 million Americans over the next five years.

ROVNER: The unions brought along some of their members they say could be affected by the proposed 40 percent tax on plans that cost more than $23,000 for a family and $8,500 for an individual, people like Gary Willett, who works at a grocery store warehouse in the Washington, D.C. area.

Mr. GARY WILLETT: We gave up part of our wage increases to maintain our health and welfare benefits. I wouldn't call it a Cadillac health plan. I pay 20 percent of my major medical charges and I have an annual deductible of $200.

ROVNER: Valerie Castle Stanley, who works for an AT&T call center in southwest Virginia, says her family can't afford to pay any more.

Ms. VALERIA CASTLE STANLEY: We're not rich. We're average middle class Americans. We need quality health care. When I heard some of our senators want to tax our health care, I just couldn't believe it.

ROVNER: All the workers, including Utah elementary school teacher Lilly Eskelsen, urged the Senate to follow the House's lead when it comes to paying for the health bill. Rather than taxing health benefits, the House bill imposes an income surtax on high income earners.

Ms. LILLY ESKELSEN (Teacher): Why would you not look first to millionaires to carry their fair share before you ask a third grade teacher to carry the load.

ROVNER: But economists say there's a reason to include the tax on generous health plans. It's a first step towards slowing the rate of health care spending. Right now health insurance is tax-free to both employers and workers, which economists say encourages over-consumption of health care. Paul Van de Water of the liberal think tank the Center on Budget and Policy Priorities says economists are big believers in incentives, in particular that people respond to economic incentives they're given.

Mr. PAUL VAN DE WATER (Center on Budget and Policy Priorities): (Unintelligible) price of health insurance goes up a bit because there's a tax placed on very expensive plans, it'll encourage people to be more frugal in buying health insurance and provide one more incentive to find more efficient health insurance coverage.

ROVNER: Of course what worries the unions most is that companies will simply avoid the tax by cutting benefits and not raising workers' wages. That's an argument that puzzles Van de Water.

Mr. VAN DE WATER: In fact, the unions who are amongst the most vocal critics of the proposal have been amongst the first to say, well, we gave up cash wages to get better health insurance. And that's doubtless correct. But there's no reason that that machine doesn't work in reverse just like it works in forward.

ROVNER: In other words, the unions can simply bargain the other way for cheaper benefits and bigger raises, and they'll have some time to do it. Under the bill, the excise tax doesn't take effect until the year 2013, but that's not dampened their opposition to the proposed tax.

Julie Rovner, NPR News, Washington.

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