Obama and labor leaders to square off over tax on high-cost healthcare plans

The presidents of about a dozen labor unions will meet with President Barack Obama on Monday to push him to limit the scope of a proposed tax on high-cost insurance plans.

Labor sources acknowledge they will not succeed in completely eliminating the tax, but they hope to raise its threshold so that fewer labor households feel the impact.

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“At the end of the day there’s going to be a compromise,” said a labor official.

Andy Stern, president of the Service Employees International Union (SEIU), told The Hill on Friday that the final bill would likely include some form of the excise tax.

“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, it’s hard to look that in the face and say we can just win this outright,” Stern said.

Obama will meet on Monday with Stern and the heads of several other powerful unions.

Other attendees include Richard Trumka, president of the AFL-CIO; Gerald McEntee, president of the American Federation of State, County and Municipal Employees (AFSCME); and Larry Cohen, president of the Communication Workers of America.

The Senate bill would raise about $150 billion from 2013 to 2019 by taxing employer-provided health plans costing more than $8,500 for individuals and $23,000 for families.

Labor officials, citing an analysis by the Joint Committee on Taxation, claim this would hit nearly 31 million households by 2019.

But limiting the excise tax would require Senate and House negotiators to find alternative sources of revenue to fund healthcare reform.

One labor official said there is growing acknowledgement among union leaders that the House proposal of a 5.4 percent surtax on the nation’s highest income earners is all but dead.

The official said it may be possible to tap alternative revenue streams, such as requiring employers to pay more in taxes.

The Senate bill does not require employees to provide health benefits, although businesses with 50 or more workers must pay a $750 penalty for each worker in the company if they do not provide coverage.

The official said labor leaders may push for a bigger increase in the Medicare Hospital Insurance tax. (The Senate bill increases it slightly.)

To strengthen their negotiating position with the president, unions have pressured House Democrats to hold the line against the tax on high-cost plans.

They have warned the most vulnerable House Democrats that they would lose support from union-affiliated voters.

“We have said that. Absolutely,” said one labor source.

Union lobbyists have focused their pressure tactics on freshman and sophomore lawmakers facing difficult reelections.

Many of these Democrats vowed not to support tax increases on people earning less than $250,000 a year. Labor officials say that backing the excise tax included in the Senate bill would break this promise.

“It is no question it will impact our political ability internally to move our members,” said Harold Schaitberger, general president of the International Association of Fire Fighters.

“This is just so absolutely contrary to what we campaigned on for President Obama and the majority this last election cycle,” Schaitberger said.

Union opposition to the tax has grown louder in recent weeks. Labor groups have run print and television ads against the measure. They also have revved up their grassroots campaign by urging union members to contact targeted lawmakers.

Proponents of the tax say it will force insurance companies to lower prices and improve the efficiency of their plans. This, in turn, could free companies to spend more on wages and less on health benefits.

But many union members have negotiated for better insurance plans instead of higher wages. Labor officials fear workers will see cuts to their benefits as insurance companies lower their prices to avoid the tax.


Jeffrey Young contributed to this report.