Healthcare bill excise tax likely to survive, labor leader says

A union-opposed tax on high-cost health insurance will probably remain part of healthcare reform, a prominent labor leader said Friday.

Andy Stern, president of the Service Employees International Union (SEIU), blasted the proposal to levy an excise tax on so-called Cadillac health plans as “unfair” to workers but acknowledged that the cards are stacked against striking it from a final bill headed to President Barack Obama’s desk.

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“When you have a president who says he wants to incorporate it and a Senate that says it wants to incorporate it and some in the House who say they want to incorporate it,” Stern told The Hill, “it’s hard to look that in the face and say we can just win this outright.”

The Senate passed such a tax as a key revenue-raiser in its version of the healthcare reform legislation and the White House supports it as one of the most important cost-containment measures in healthcare reform. But House Democrats and unions reject it as a tax on some middle-class workers.

But even some disgruntled House Democrats have begun to acknowledge in recent days that Obama’s support for the excise tax could mean they have to find a way to retain it in some form.

House Democrats and their allies face the unwelcome reality that many of their priorities would run afoul of a handful of centrist Democratic senators who rounded out the fragile 60-vote coalition that enabled the Senate to pass its healthcare bill.

Senators such as Ben Nelson (D-Neb.) and Joe Lieberman (I-Conn.) long withheld their support for the legislation and even threatened to join a Republican filibuster if other union-backed priorities, such as a government-run public option insurance program, were not stripped from the bill. These senators and others also oppose the income tax surcharge on millionaires that finances the House bill.

Stern expressed strong frustration with the Senate and with those centrists -- without calling any out by name -- and hinted that labor unions and their members, who contributed with money and effort to winning Democratic majorities in the House and Senate, would be less motivated next time around.

“Democrats were given a gift that they have squandered,” Stern said. “If this is the way the Senate is going to do business when they have 60 votes, they’re pretty much guaranteeing a self-fulfilling prophecy that they won’t have 60 votes.”

If a handful of senators remain able to force major concessions by the liberal majority in the chamber, “the hostage taking will only increase,” Stern said. “There’s a reason we don’t negotiate with terrorists.”

On Monday, Stern and other labor leaders will meet with Obama to discuss healthcare reform. Stern said he would press his case that the excise tax is bad policy and bad politics.

“It’s not really a comprehensible public policy,” Stern said. The excise tax remains the most worrisome part in healthcare reform for his members: “The one issue that’s concerning to them, because they think it’s unfair, is taxation of benefits.” Often, union members have bargained for tax-free fringe benefits in lieu of higher wages.

The overriding message he plans to deliver to Obama, however, is one of support. “We want to make it clear to the president that we really want this bill to pass,” Stern said. “We should get it as right as we can.”

Nevertheless, Stern said, the bills that have passed Congress would achieve many of the SEIU’s objectives. “We’ve come a long way, baby,” he said.

Stern acknowledged that the universe of choices is limited for Democrats trying to wrap up healthcare reform on a variety of issues. “We’re trying to work within the specific bills that are out there,” he said. “It’s almost unimaginable to have a brand-new idea that’s not been vetted by the process.”

The SEIU is far from willing to accept the excise tax as passed by the Senate, however.

The Senate-passed bill would establish a 40 percent tax on the cost of health insurance policies above $8,400 for individuals and $23,000 for families (the cost below those thresholds would not be taxed). Some people, such as police officers, firefighters and others whose insurance is expensive because they hold high-risk jobs would be exempt.

One problem with that approach, Stern said, is that approach presumes the high premiums are equivalent to excellent benefits, which is not always the case partly because of the widely varying costs of medical care and cost of living in different regions of the country. Some people pay “Cadillac costs for Chevy benefits,” Stern said.

An alternative to basing the tax on premiums is to base it on the value of benefits. In addition, the cost threshold could be raised and indexed to inflation so it affects fewer people in the future and existing policies under existing union contracts could be exempted for longer than the Senate bill would allow.