Health Care’s Union Label

Labor unions are on board for health care reform, now that they’ve struck a deal that gives union plans a five-year exemption from the legislation’s excise tax on high-cost insurance.

But the agreement, which was reached Thursday, provoked resentment today from other groups, including small businesses that won’t benefit from this exemption. Plus, one union criticized the deal, saying the tax on so-called “Cadillac” plans should be dropped altogether.

The deal was negotiated by unions, Democratic leaders in Congress, and President Barack Obama. Under the agreement, the proposed 40 percent excise tax on high-cost health insurance plans would not go into effect until 2018 for plans negotiated through collective bargaining agreements, as well as for plans covering state and local employees.

Others with high-cost plans—now defined as family coverage costing more than $24,000—would face the tax in 2013.

That’s not fair, contends the National Federation of Independent Business.

“Essentially, everyone but the unions winds up a loser,” said NFIB senior vice president Susan Eckerly. “The union deal defies logic since the unions wanted these high-cost plans. Small-business owners—unlike the unions—aren’t choosing these high-cost plans, they’re stuck with them because they are trapped in a bad market with no choices and high costs.”

Eckerly said the agreement shows that “unions’ needs, and not the needs of our nation’s job creators—small business—are the priority of this White House.”

“The president has proven to be a friend of working people,” is how AFL-CIO president Richard Trumka sees it.

“This is good for all working Americans, not just union people,” he said.

He listed the reasons why:

• State and local workers who aren’t union members also will benefit from their plans’ five-year exemption from the tax.
• The new agreement raised the threshold defining high-cost plans (from $23,000 to $24,000), and increased it even higher for plans that have significant numbers of women and older workers.
• It also exempts vision and dental plans from being included in the tax’s cost calculations, beginning in 2015.

The Senate included the excise tax as a way to raise $150 billion to finance expanded health care coverage and as a means of discouraging excessive health care spending. As a result of the deal, the tax will raise $60 billion less than originally planned. That means Congress will have to find this revenue elsewhere.

Unions wanted the excise tax eliminated altogether, but most were satisfied with the changes made by negotiators.

One exception is the International Association of Machinists and Aerospace Workers.

“The IAM opposes the excise tax, period,” said union president Tom Buffenbarger. “We believe it is unfair to our current members and particularly unfair to those members we hope to organize in the future.

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Kent Hoover is the Washington bureau chief for bizjournals.