Unions Back Out of Affordable Health Insurance Reform Tax
Posted: Wednesday, February 17, 2010
by Yamileth Medina
VitalOne Health
Labor unions have been some of the strongest supporters of healthcare reform. Organized labor played a key role in Barack Obama's presidential campaign and has moved with him on one of his administration's top domestic policy priorities. During earlier stages of negotiation, officials even agreed to a controversial excise tax on high-cost health insurance plans. Many union members enjoy such plans, which are more comprehensive from most standard plans. Their benefits are typically more generous than those available to people with individual health insurance, or non-union workers with employer-sponsored health insurance.Therefore, the administration and union heads agreed to a tax on family and individual health insurance policies costing over certain thresholds annually. A 40% tax was included in the bill passed by the Senate in December, but the White House negotiated more amenable terms for the unions. They likely agreed to the tax largely for political reasons--currying favor for future labor-related legislation--but also expressed support for the overall goals of healthcare reform. In fact, several major unions, such as the SEIU, had called for and organized protests in favor of the public option.
Last month, there was a tentative agreement: unions would get a national health insurance exchange market with subsidies, along with stricter penalties levied towards employers that do not offer health insurance. In exchange, they would agree to the tax on high-cost health insurance plans. Currently, health insurance is tax-exempt for employers. The excise tax, which would be paid by health insurance companies, hoped to inspire them to offer (and for consumers to choose) more affordable health insurance options.
However, the political climate has changed. The victory of Republican Scott Brown in the Massachusetts special election means that any affordable health insurance reform that passes will probably be far more modest. Brown was aided in his triumph by union members, a historically Democratic demographic that voted in his favor. Many of them believe that their own health insurance will change for the worse: instead of working on reducing waste and administrative costs to fall under the tax threshold, health insurance companies will probably raise deductibles and co-payments instead. Some labor leaders now feel that they would be giving up too much for scaled-down legislation. Meanwhile, politicians in both the House of Representatives and the Senate are crying foul.
How can the Obama administration fund affordable health insurance reform now? One option is to expand the Medicare payroll tax to dividends, capital gains, and other investment income; although some believe that doing so will discourage investment. In any event, the excise tax appears to be near death.
(Image: allaboutgeorge under CC 2.0)
Yamileth Medina is an up and coming expert on Health Insurance and Healthcare Reform. She aims to help people realize that they can find affordable health insurance right now. Yamileth lives in Miami, FL.
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