The health care reform debates recently have included some discussion of health care plans being taxed. Here is a very thorough explanation of some recent developments on this issues from Henry Bayer and Roberta Lynch:
As you know, over the past year the American labor movement, along with tens of thousands of our fellow citizens, has been working to make health care available and affordable to everyone. With strong leadership from President Obama, for the first time since the enactment of the Medicare Program in the 1960’s, Congress has tackled the challenge of reforming the American health insurance system.
This has been no easy task. Although Medicare, a government-run health care program that covers every senior citizen in our country, has proven tremendously successful and popular, right-wing ideologues and employers teamed up to attack any effort to expand government involvement in reshaping our health care system. They spread misinformation and managed to confuse many people about what health care reform would mean for the average citizen.
The fact is that health care in America has become big business for the insurance companies who make huge profits and exert enormous control over who gets health care and how it is delivered. There is no way to reform the system without taking on their power and profits—and only government has the ability to do that.
After months of Congressional debate and widespread public discussion, both houses of Congress have now passed bills that would vastly expand access to health care and would help to rein in the soaring costs of health care. This legislation would prevent insurance companies from denying coverage for preexisting conditions. It would make sure that workers who lose their jobs don’t lose health care coverage. And it would make health care affordable for those who make too much to qualify for Medicaid, but don’t get coverage through their employer, providing health care to some 31 million people who now don’t have it.
These are the common elements which both bills share; there are some differences between them, however, that are still in the process of being worked out. One of the biggest differences has to do with how expanded health care coverage would be paid for. The House bill would tax individuals with higher incomes; the Senate bill would tax higher-cost health insurance plans.
The labor movement believed that the House version was preferable, but the Senate has been unyielding in its refusal to tax the wealthy, so we have focused our efforts on trying to reduce the impact that the Senate’s plan to tax higher-cost health plans would have on working families. (While the tax would be on insurance companies, it has been widely acknowledged that it could be passed on to the employers who purchase plans and ultimately in some part to the workers in those plans.)
Over the past few days, President McEntee and other labor leaders have been in meetings with the White House and they announced late yesterday that an agreement has been reached which, we believe, will be incorporated in any final bill that comes before Congress for a vote. This agreement means that working families will not be unfairly taxed. It includes the following provisions:
* State and local government health care plans and health care plans negotiated under collective bargaining arrangements will be exempted from the tax entirely until the year 2018
* The threshold above which the tax would be applied was raised to $24,000 for family coverage and to $8,900 for individual coverage. (The general range of plan costs for AFSCME members in Illinois is between $15,000-19,000 for family coverage, well below this threshold—and individual coverage is also much lower).
* Dental and vision benefits will be excluded from the calculation of the threshold.
* The threshold will be increased if the rise in coverage costs between 2010 and 2013 is higher than forecast.
* The plan increases the threshold for plans that cover retirees and workers in certain high risk occupations.
All Americans, both union and non-union, will benefit from this agreement because it raises the threshold level and exempts dental and vision benefits. It ensures that plans dominated by women and older workers, which tend to be more costly, are protected. It also protects plans covering retirees and workers in high risk jobs.
As is customary with legislation like this, workers who negotiate health care benefits through their union will have a transition period to allow labor and management time to negotiate new terms. Among the laws with similar transitions are: The Family and Medical Leave Act, the Health Insurance Portability and Accountability Act, COBRA Health Care Continuation, the Mental Health Parity Act and the Pension Protection Act of 2006.
Public employer plans are also protected during the transition, as state and local governments continue to struggle with the Bush Recession. By exempting their plans from increased taxes, state and local governments will not have to strap taxpayers with more service cuts, which could throw our economy back into another recession.
With this agreement in place, the labor movement can continue its vigorous advocacy for the passage of historic health insurance reform legislation that is a vital step forward in creating a health care system that meets the needs of all Americans.