AFL-CIO has ‘concerns’ about health insurance tax

The AFL-CIO sought to slow momentum on one idea to finance healthcare reform that has been gaining supporters on Capitol Hill by expressing misgivings about a proposal to tax insurance companies that offer the most expensive plans.

The tax on so-called “Cadillac” health plans has been seen by Democrats as a compromise that would allow them to to raise revenue for healthcare reform and reduce healthcare spending by discouraging very generous insurance plans without capping the currently unlimited tax exclusion for workplace health benefits.

“The AFL-CIO has real concerns about the proposal to tax high-cost health plans currently under consideration in the Senate Finance Committee — how it is defined will have a significant effect on which plans are taxed and at what level,” AFL-CIO President John Sweeney said in a statement.

Organized labor successfully lobbied Democrats to abandon a proposal to cap the exclusion. An opposition campaign from the AFL-CIO and other unions could threaten the prospects for the “Cadillac plan” tax, which has been generating support among Senate and House Democrats and positive signals from the White House.

The Finance Committee is considering a proposal that would levy a tax on insurers when they sell so-called “Cadillac” insurance plans that cost more than $25,000 a year. The tax would raise $90 billion over 10 years, according to Democratic senators.

“The Goldman-Sachs Cadillac plan for executives may be the target of this proposal, but it could well end up hitting benefits for working families and retirees already reeling from health care costs if lawmakers rely on this as a way to curb federal spending rather than enact real cost containment,” Sweeney said.

In addition, Finance Committee Chairman Max Baucus (D-Mont.) and others believe that creating the tax would discourage insurance companies from selling the most costly plans and employers from buying them, which could reduce healthcare spending by discouraging individuals from consuming unnecessary or elective procedures.

Sen. John Kerry (D-Mass.), who proposed the idea to the committee, visited with the AFL-CIO’s executive committee Tuesday to explain his plan. Evidently, he did not assuage their skepticism.

The AFL-CIO is not the only union with misgivings about the tax proposal.

“We have not seen enough details on how our plans, most of which are self funded multi-employer benefits funds, would be treated by the insurer tax proposal but it is something we are concerned about and continue to follow,” Jacob Hay, a spokesman for the Laborers International Union of North America, wrote in an e-mail.

At least one Democratic lawmaker with close ties to organized labor believes the unions may not oppose the insurance tax. “It is less concerning” than a cap on the tax exclusion, Sen. Debbie Stabenow (D-Mich.) said Tuesday. “I’m not saying they’re supporting it but it’s less concerning.”