JANUARY 15, 2010, The Wall Street Journal
Unions Cut Special Deal on Health Taxes
Democratic negotiators acceded to union demands for a scaled-back tax on
high-end health-insurance plans, exempting union contracts from the tax until
2018, five years beyond the start date for other workers.
The deal helped Democrats clear a key hurdle, but the reduced tax added to
the pressure to find new revenue to pay for their health bill, which is designed
to give coverage to tens of millions of uninsured Americans. Negotiators were
considering increasing the financial hit on drug makers, nursing homes and
medical-device makers, according to people familiar with the discussions.
The tax on high-value insurance plans was included in the Senate's version of
the bill but not the House's, and has been one of the main unresolved issues as
Democrats work to combine measures passed by the two chambers late last year.
Unions, as well as many House Democrats, are fiercely opposed to the tax on
"Cadillac" insurance plans, which they say will hit many middle-class workers
and undermine benefits won by unions.
President Barack Obama has supported the measure as a way to pay for the
legislation and control overall health-care spending. The changes mean that the
tax will raise about $90 billion over 10 years, down from $149 billion in the
Senate bill, labor officials said.
Mr. Obama traveled to Capitol Hill to reassure House Democrats who feared a
vote for the bill would be politically damaging. "I know how big a lift this has
been. I see the polls," Mr. Obama said. He promised to wage a "great campaign
from one end of the country to the other to sell the legislation to the public
should it become law.
Republicans seized on the delay for unionized workers to say the deal was
unfair to workers not in unions, who would be forced to pay the tax five years
earlier, starting in 2013.
"The White House and congressional Democrats are picking one group of workers
over another," said Antonia Ferrier, spokeswoman for Republican House Minority
Leader John Boehner. "If this sounds discriminatory, well it is."
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.
In addition to softening the tax on high-end plans, Democrats plan to
increase subsidies for lower earners to buy health insurance. To pay for such
changes, Democrats are considering levying an additional $10 billion in fees on
medical-device makers, for a total of $30 billion over 10 years. But it wasn't a
done deal as the House was showing resistance.
Congressional negotiators have also told drug makers they were considering
decreasing reimbursements under government health programs or increasing fees by
an additional $10 billion over a decade, beyond the $80 billion in concessions
the industry agreed to last year, according to people familiar with the
negotiations. And lawmakers are looking to push fees on nursing homes past the
$14.6 billion over a decade that is in the Senate version.
The union deal comes as the White House and congressional leaders pressed to
reach a final agreement on key parts of health-care legislation by the weekend.
Top congressional Democrats negotiated with the president into the night
Thursday, the second consecutive day of lengthy talks. They hoped to have an
agreement ready for assessment by the Congressional Budget Office as soon as
Friday.
Issues that have yet to be resolved, aides said, included how to structure
the new exchanges where Americans would buy coverage, how much to increase the
Medicare payroll tax and how to handle restrictions on abortion coverage.
Union leaders pressed their case for the changes on the high-end insurance
tax at two White House meetings this week, including a two-hour session with Mr.
Obama.
The dispute threatened to drive a wedge between the White House and unions,
which strongly backed Mr. Obama's presidential campaign. The president of the
AFL-CIO, Richard Trumka, this week suggested that without changes to this
provision, unions might be less likely to help Democrats on the ballot this fall
and Republicans could take back the House. Another union threatened to pull
support for the health bill, Mr. Obama's top legislative priority.
After Thursday's agreement, labor leaders had warm words for the president
and said they would promote the deal among Democrats.
Under the Senate bill, health insurers would have paid a 40% tax on premiums
that exceed $8,500 annually for individuals, or $23,000 for family plans. The
agreement reached Thursday raises those thresholds slightly, to $8,900 for
individuals and $24,000 for families, with annual increases tied to one point
above the Consumer Price Index, labor and White House officials said.