Tags: obama | healthcare | union | plans | cadillac

Obamacare May Saddle Union Workers With High Costs

By John Rossomando   |   Thursday, 06 May 2010 03:44 PM

Union workers’ “Cadillac “ health benefits were supposed to have been universally shielded from the planned tax on those benefits under a deal with the Obama administration.

But a closer look at the healthcare law shows not all union workers will benefit from the deal, particularly those in nonhazardous occupations.

The original deal that the AFL-CIO and the Obama administration sought to exempt union workers from a 40-percent excise “Cadillac” healthcare plan tax. But many probably will see their plans taxed under the final language Congress adopted last month.

“What they originally got was a complete carve-out because you didn’t have to pay this tax if you had a collectively bargained insurance plan,” says Curtis Dubay, a senior tax policy analyst at the Heritage Foundation.

But the law’s language appears to have diluted the deal and made it possible that some union workers will become subject to the tax when it takes effect in 2018, Dubay tells Newsmax.

The law defines a high-cost healthcare plan as one that costs more than $10,200 for an individual, or $27,500 for a family, and does not mention collectively bargained healthcare plans.

The law’s provision restricting the exemptions to those of retirement age and those in “high-risk” occupations means union workers in less hazardous occupations could still potentially get hit with the tax unless Congress amends the law or repeals it.

The definition of a “high-risk” profession likely will be left up to the regulators, says Ryan Ellis, tax policy director with Americans for Tax Reform.

The tax initially had been scheduled to take effect in 2013, but union pressure delayed its implementation until 2018 and almost halved the previously projected revenue from the tax from $150 billion over 10 years to $90 billion.

The rising costs of health insurance also could end up causing more and more Americans’ health insurance plans to qualify as “Cadillac” plans once the 40-percent excise tax hits in 2018.

In recent years, healthcare insurance costs have increased by an average of at least 9 percent annually, according to Healthnews.com. This is more than three times the current overall inflation rate.

And many estimates suggest that number could accelerate once the healthcare reform law takes effect in 2014. The April 22 report by the chief actuary of the Center for Medicare and Medicaid Services found the healthcare reform legislation could increase that number by as much as .9 percent over the next decade.

“More and more plans that are not necessarily ‘Cadillac plans’ will be hit with the tax in the future,” Dubay says.

Although Dubay and Ellis do not support the tax on principle, they agree that the Obama administration’s decision to delay its implementation until 2018 due to union pressure eliminated the one part of the law that could have reduced the rate of healthcare inflation.

Had the tax been implemented in 2013 as originally planned, it would have forced insurers to stop offering these plans.

“If anything this was perhaps the most effective thing they were going to do to bend the cost curve,” Ellis says. “We were still opposed to it because it was a tax increase. And the unions just managed to go in and gut the thing.”

The healthcare reform law did not contain many provisions that would have contained real-world healthcare costs, but Dubay told Newsmax the tax would likely have been the only provision that had the potential of doing so.

“By pushing it off basically indefinitely, they give away that one thing that could actually lower costs,” Dubay says.

Calls to the Service Employees International Union seeking comment were not returned.

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