- The Washington Times - Tuesday, January 12, 2010

Labor leaders on Monday threatened to fight a proposed tax on so-called “Cadillac” health insurance plans, warning President Obama and Democratic lawmakers that failure to deliver on campaign promises could cost them union support and their congressional majorities.

Top union officials took aim at a 40 percent tax on high-end insurance plans in the Senate health care overhaul bill, arguing it would hit the middle-class workers the president pledged to protect from tax hikes during his campaign.

“The benefits tax in the Senate bill pits working Americans who need health care for their families against working Americans struggling to keep health care for their families,” Richard L. Trumka, president of the AFL-CIO, said in a news conference Monday ahead of a meeting between a dozen labor leaders and Mr. Obama.

“This is a policy designed to benefit elites — in this case, insurers, hospitals, pharmaceutical companies and irresponsible employers, at the expense of the broader public.”

The International Association of Fire Fighters said they would support those who support them.

Labor leaders argue that many of their members have high-priced plans not for their generous coverage but because they are in “high-risk” professions, such as coal mining or construction. They say that the tax will hit nearly 31 million households by 2019, citing statistics from the Joint Committee on Taxation.

The proposed tax on high-valued insurance plans, backed by Mr. Obama and the Senate but opposed by labor unions and the House, threatens to divide Democrats as they try to put the finishing touches on their health care overhaul legislation.

Proponents of the Senate’s “Cadillac” tax — so-named because it’s intended to tax only the ritziest plans — say it would encourage cheaper insurance plans and drive down health care costs. The bill would impose a 40 percent tax on individual insurance plans valued at more than $8,500 and family plans over $23,000.

But House Democrats, backed by labor unions, would rather see wealthy Americans get a tax increase.

The White House defended Mr. Obama’s support for the tax provision in the face of opposition from such a core Democratic constituency by stressing other policies that benefitted labor, including the stimulus bill and the auto bailout.

“I think working men and women will ask themselves who’s on the side of insurance companies and who’s on the side of taking insurance companies on? I think that will be an argument that will be front and center. And I think working men and women will make that decision,” White House press secretary Robert Gibbs said.

Ahead of the meeting Monday, Mr. Gibbs declined to say whether the tax is a must-have to ensure Mr. Obama’s signature, but noted that he supported the Senate’s bill.

“I don’t think we’d be having the discussion if we weren’t interested in hearing their viewpoint,” Mr. Gibbs said of the labor unions.

Mr. Trumka warned that politicians who count on labor support without delivering on promises risk a repeat of 1994, when Democrats lost their majorities in both the House and the Senate.

Democrats have to come up with a way to pay for their overhaul bill, a combination of the House and Senate plans that is likely to come in just under $900 billion over 10 years. It’s the biggest obstacle ahead of them, but not the only one. They also need to sort out how to restrict abortion language and whether to establish national or state-based insurance exchanges.

The Senate has less of a vote margin than the House. In the upper chamber, the health bill passed with 60 votes — exactly enough to overcome a Republican filibuster, leaving no room for defections from Democrats uncomfortable with the House’s so-called millionaires tax.

Rep. Frank Pallone Jr., New Jersey Democrat, suggested last week that the final bill could include some combination of the two options.

But the payment methods aren’t entirely interchangeable.

The House’s tax on wealthy Americans — 5.4 percent for families with incomes over $1 million or individuals over $500,000 — would raise about $460 billion over a decade, according to the Congressional Budget Office. The House’s $894 billion plan would generate the rest of its financing through funding cuts in Medicare and Medicaid, fining employers who don’t provide insurance coverage and other sources.

The Senate’s $871 billion plan, however, raises a smaller portion of its funding through the “Cadillac” tax, bringing in $149 billion over a decade. The Senate plan would also be financed through cuts to Medicaid and Medicare funding and raise some money by taxing medical device makers, fining some employers that don’t provide insurance coverage and some individuals who don’t get it.

Kara Rowland contributed to this report.

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