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Excise tax on high-cost health plans would have nonunion impact, study shows

Washington Post, February 18, 2010

 By Alec MacGillis, Washington Post Staff Writer

A proposed tax on high-cost health insurance plans, an element of Democratic health-care legislation that has been strongly opposed by organized labor, would actually fall equally on nonunion plans, according to a new analysis.

The controversial tax has been widely viewed as a labor issue, but at least 80 percent of the workers whose plans would be subject to the tax in 2019 would be in nonunion jobs, according to the analysis by Ken Jacobs of the University of California at Berkeley Labor Center and William H. Dow, professor of health economics at Berkeley and a member of President George W. Bush's Council of Economic Advisers.

This impact is roughly in line with the overall breakdown of nonunion and union workers with employer-provided plans. And it would be true both under the version of the tax passed by the Senate and a more labor-friendly one the White House agreed to last month.

The excise tax on so-called Cadillac health plans has emerged as one of the most contentious elements of the proposal that congressional Democrats are cobbling together from bills that passed the House and Senate.

The bill that passed the Senate would raise $150 billion over 10 years by taxing plans worth more than $23,000 for families and $8,500 for individuals. Any value that exceeds those thresholds would be taxed at 40 percent. Proponents say the tax would slow the growth in health-care costs, as employers and employees shift to less generous plans to avoid the tax. The savings from switching to lower-cost plans, proponents say, would go into higher wages.

Opponents of the tax, including many House Democrats, doubt it will slow the growth in costs, arguing that consumers have a limited role in driving health-care spending. They also point to research suggesting that the tax would hit not only truly lavish plans, but also plans that are costly because they are in expensive regions or in businesses that have many older workers. And they warn about the political risk of taxing middle-class voters' health benefits, noting that Sen. Scott Brown (R-Mass.) made hay of the tax in his campaign.

The House bill instead relies on a surtax on the wealthy. But President Obama has made plain his preference for the tax on high-cost plans. To mitigate its impact, the White House and union leaders last month negotiated revisions, including slightly raising the tax threshold, limiting the tax for businesses with many female or older workers, and exempting government workers and union plans until 2018.

Congressional Republicans have attacked the deal as a carve-out for labor, but according to the analysis, the revisions would also benefit many nonunion workers.

The authors, whose work was funded by the California Endowment and the liberal Institute for America's Future, estimate that the revisions would reduce the tax's revenues by $41 billion, of which 71 percent would accrue to nonunion workers. If employers remained with their current plans, the researchers estimate that 23 percent of plans would be subject to the tax by 2019 in the Senate version, while 14 percent of plans would be hit under the revised deal.

The fate of the tax in the ongoing Democratic discussions is unclear. The labor-friendly revisions may be jettisoned because of the political attacks on them, but unions and many House Democrats remain firmly opposed to the original version.

Rep. Joe Courtney (D-Conn.), a leading opponent of the tax, said the analysis "confirmed what I've been saying all along -- this is a much bigger issue than labor-union households."

"The momentum in the House against it has gotten even worse," he said. "The more this thing has sunk in, it's become politically dangerous in the minds of a lot of members."

Original Article

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