Unions Lobby Democrats to Drop Health Insurance Tax

Published: Mon 14 Dec 2009

Thomas Kristoffersen

Although union leaders have been among the staunchest supporters of President Obama's health care reform bill, the union lobby is pressuring Democrats in the Senate to eliminate the bill's tax on high-dollar health insurance plans to help bankroll the overhaul of the U.S. health care system.

Multiple labor union members maligned the proposed tax on what the federal government calls "Cadillac plans," contending that it would affect not just wealthy corporate officers but also middle-class Americans who didn't take wage increases in order to negotiate better medical insurance benefits.

Since the start of last week, the Senate has debated on the health care reform bill but took a brief hiatus on Thursday afternoon in order to address a different spending bill-a pay increase for all federal workers. The health care reform bill debate is expected to recommence on Monday.

The labor unions are most concerned about a planned 40 percent excise tax on health insurance companies, tied to premiums paid on medical plans that cost more than $8,500 per year for individuals and $23,000 annually for families. The revenue from the tax would amount to about $150 billion over ten years in order to help fund the cost of the Democrats' $1 trillion health care overhaul. The bill, which is drawing close to passage, would retool the health care system in the United States with new rules for employers and individuals intended to extend medical coverage to the more than 30 million Americans who are uninsured.

The minimum cost of health insurance plans subject to the tax has already been changed once to assuage the concerns of labor unions, and Senator John Kerry of Massachusetts has led those efforts. Senator Kerry has indicated that additional changes might lie in store. However, labor organizations like the AFL-CIO, Teamsters, and the National Education Association (NEA) are petitioning the Senate to eliminate the tax altogether. Instead, the unions advocate the approach taken by the House, which raised revenue for the health care overhaul by raising taxes on individuals earning more than $500,000 annually and households making more than $1 million annually.

Union leaders have paraded hundreds of members in front of the Capitol this week to entreat lawmakers to drop the potentially costly tax. The protest are expected to continue indefinitely, or until some type of compromise is agreed upon.