By Alec MacGillis
PITTSBURGH – Labor officials who had been growing disheartened by Democratic concessions are feeling a bit better about things as they host President Obama at the AFL-CIO convention here this afternoon. They’re glad Obama slapped a tariff on Chinese tires and they’re glad that he showed some mettle in last week’s health-care speech.

But there is still great concern about the details of the health-care proposals taking shape in Washington. And not just over the public option, the government-run insurance plan that incoming AFL-CIO president Richard Trumka has been declaring must be in the bill if Democrats want labor’s support. The less noted, but potentially more relevant, point of dispute is the unions’ opposition to the source of revenue being embraced by Finance Committee Chairman Max Baucus, and also endorsed by Obama last week: an excise tax on the most expensive employer-provided insurance plans.

The thinking behind the tax is that it would raise hundreds of millions of dollars while at the same time curbing health-care spending by leading insurers or employers to stop offering the costliest plans to avoid the tax, or passing the tax on to employees in the form of higher premiums, which might lead employees to seek cheaper plans.

But labor unions have been leading the charge in arguing that taxing costly plans would hit not only executives with gold-plated health plans but also middle-class workers who have over the years fought for better health coverage even as their wages stagnated. And Obama had promised not to increase taxes on families making under $250,000 per year.

Baucus and others in Washington have sought to work around such concerns by setting a seemingly high threshold for the value of plans that are going to get the 30 percent excise tax -- $21,000 for a family plan. But Gerry Shea, the AFL-CIO’s chief health-care negotiator, said here this morning that the tax would still hit many union members and other middle-class workers.

For one thing, he said, some union plans are already approaching the $21,000 threshold, particularly for workers in high-cost areas and in industries with many older workers. He said he recently compared two unions on the West Coast that had sharply different premium costs – one cost $10,000 for a family, the other cost $16,000, and the more expensive one also had higher deductibles. The only difference, he said, was that the union with the higher rates had an older workforce making more insurance claims.

Second, he said, the tax would not go into effect until 2013, and at that point, many more union members and other middle-class workers would have plans costing $21,000, given the rising costs of health care. And the threshold would over time be linked to the consumer price index, not the rise in medical costs, raising the likelihood that even more plans would fall above the line.

Most disconcertingly, he said, the outline that has emerged so far suggests that the tax will apply only to employer-provided group coverage plans and not individual plans. And although the original intent of the tax was to capture gold-plated executive plans, the fact is that quite a few executive plans are in fact individual insurance plans purchased for them by their employers, not group plans. It is possible, Shea said, that the tax would not apply to some of these Cadillac plans.

“It would be wonderful to find out which lobbyists negotiated that,” he said.

By Post Editor  |  September 15, 2009; 12:17 PM ET
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