Middle ground on taxing health plans

For more than 70 years, the labor movement has been fighting for affordable, quality healthcare for everyone in America, not just union members, and we are not about to stop now. We will continue working with Congress and the White House to pass legislation that delivers meaningful reform that benefits working families.

{mosads}I want to be clear about one issue in the healthcare debate — the proposed tax on higher-cost insurance plans. It was precisely because of our commitment to affordable, quality healthcare for all that we objected to this tax.

First, we rejected the idea that healthcare costs are spiraling out of control because working people have too much insurance.

Proponents of the tax argue it is necessary to force health plans to raise their deductibles and co-pays; that patients will consume less healthcare if they have to pay more for it; and that this will “bend the cost curve.”

This approach is fundamentally wrongheaded. The enormous amount of wasteful spending in our healthcare system is not the fault of consumers, who are not in the best position to distinguish effective from ineffective treatments. The key to reining in healthcare spending is to get providers to deliver care in more cost-effective ways, not to raise out-of-pocket costs for patients.

Second, we pointed out that the benefits tax unfairly punishes people whose health plans have higher costs for reasons that have nothing to do with “gold-plated” benefits. Research shows that health status, age, gender, geography, industry and firm size have more to do with high premiums than benefit generosity does.

Third, we insisted that health reform should not be financed on the backs of the middle class. It is only fair to ask the wealthiest 1 percent to give back a portion of the tax cuts they received during the Bush years.

Thanks to our efforts, last fall the Senate raised the cost threshold for the tax, so that fewer lower-cost plans would be affected, and adjusted the threshold for retirees, workers in high-risk occupations, and workers in high-cost states during a three-year transition.

Under the tentative compromise announced last week, the cost threshold will be raised even further. It will be increased again if premiums outpace projections between now and 2013; it will be adjusted upward to account for age and gender; and the cost of dental and vision coverage will not be counted towards the threshold. All these changes will help minimize the harmful impact on union and non-union workers, and they mean the richest 1 percent will likely have to assume more responsibility for financing reform.

There will also be a five-year transition period for union workers and for state and local public employees, including non-union workers. It is fairly typical for legislation affecting pension and health benefits to have delayed effective dates for collective bargaining. The House bill similarly provides a five-year grace period for employer health plans with regard to many insurance market reforms. The Senate bill also phases in the individual mandate over three years and provides a seven-year phase-in for fees on insurers and medical device manufacturers. Both bills include a transition period during which larger employers will be prohibited from buying lower-cost coverage through the exchanges.

This was not everything we wanted. We think the benefits tax should be eliminated altogether. Polling shows Massachusetts voters clearly rejected the idea of a tax on benefits. But these improvements to the tax can provide the basis for compromise legislation that will be seen as an historic milestone in the long journey toward comprehensive reform.

While the loss of a Senate seat creates some procedural hurdles for getting reform passed, it can still be done. But it is imperative that the benefits tax be fixed at the same time. Promises to clean up this mess in the future are not good enough.

It may take time for final legislation to finish its journey through Congress, but Democrats can make clear today that this is the compromise that will be signed into law —and with a clear and certain path forward on health care they can turn their attention to delivering solid results for working people in the areas of jobs, protecting workers’ freedom to bargain for better wages and benefits, and reining in Wall Street.

Trumka is president of the AFL-CIO.