President risks fight with left over taxing insurance plans

President Barack Obama is risking a fight with some of his most loyal supporters by siding with centrists on taxing expensive insurance plans.

Labor officials and liberal leaders warn that Obama faces a political backlash if he backs the taxing of high-cost plans to pay for healthcare reform.

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Union officials are pressing Obama behind the scenes to back away from the proposal floated by Senate Finance Committee Chairman Max Baucus (D-Mont.). Some experts estimate the proposal could raise about $150 billion over ten years.

The split is the latest fight between Obama and liberals on healthcare reform. Many liberals were dismayed last month when the president and senior administration officials shifted their rhetoric on the need for a public insurance plan. Obama said last month that a government insurance plan is “not the entirety” of reform

In the past week, Baucus unveiled a proposal to levy a 35-percent excise tax on insurance companies for any plans of single individuals costing more than $8,000 and family plans above $21,000.

Obama appeared to endorse the proposal in his address to Congress on Sept. 9 that outlined his healthcare reform plan.

“This reform will charge insurance companies a fee for their most expensive policies, which will encourage them to provide greater value for the money — an idea which has the support of Democratic and Republican experts,” Obama said.

“And according to these same experts, this modest change could help hold down the cost of healthcare for all of us in the long run.”

Obama’s nod of support has rankled liberal leaders and labor union officials.

“It’s clear that he’s open to that and I think it’s a really bad idea,” said Roger Hickey, co-director of Campaign for America’s Future, a liberal advocacy organization.

“The whole proposal is premised on the idea that people who have a good insurance plan use too much healthcare,” Hickey added. “Unless you have a psychiatric condition, very few people like to go to the doctor or have operations they don’t need.”

Labor unions are pressing Democratic members of the Finance panel to resist Baucus’s plan to tax single-person insurances plans starting at $8,000 and family plans starting at $21,000. They want Baucus to raise the tax threshold substantially.

“We’re seeking changes in that, big time,” said a labor official. “This is something all the unions agree on. Many union plans would be affected by a tax on plans starting at $21,000.”

“It’s one thing to go after a Goldman Sachs plan but it’s another matter to hit the healthcare benefits of rank-and-file workers. We’re trying to persuade the White House as well.”

Liberal groups and labor unions say they prefer the plan Obama first floated to pay for healthcare reform: lowering the rate of charitable deductions for taxpayers who earn more than $250,000. It would have allowed high-income earners to deduct 28 percent, instead of 35 percent, of charitable deductions.

The proposal would have raised $312 billion and would have affected only the wealthiest 1.2 percent of taxpayers, but it ran into early opposition from Baucus and House Ways and Means Committee Chairman Charles Rangel (D-N.Y.).

Health Care for America Now, a coalition of liberal and labor groups such as the AFL-CIO, the SEIU and MoveOn.org, hopes Obama and Democrats will reconsider.

“Taxing high-cost plans has nothing to do with the income people earn. People who have good plans happen to have a wider choice of doctors and lower co-payments,” said Richard Kirsch, national campaign manager of Health Care for America Now.

Liberals and labor officials argue that taxing expensive plans would disproportionately affect elderly workers, women and those in more hazardous occupations. They say that people in high-cost states such as Pennsylvania and Connecticut would also bear the brunt.

“This punishes people with good benefits,” said Kirsch.