Congress, Labor Leaders Agree on Revised Cadillac Health Plan Tax

Janice Simmons, for HealthLeaders Media , January 15, 2010

White House and Congressional leaders passed another important signpost Thursday on the road to completing the healthcare reform bill. Following marathon negotiations with labor union leaders all week, a new deal was reportedly hammered out over the issue of taxing employees' high-cost or "Cadillac plans."

The provision, which originated in the Senate bill, will remain, but the threshold at which the 40% tax would kick-in with the high-cost plans would change. The threshold would now be for families whose plans' value reach $24,000—up from $23,000; for individuals, the $8,500 threshold is likely to remain the same.

Also under the agreement, healthcare plans negotiated under collective bargaining would be exempt until 2018—five years after nonunion health plans. The tax was originally projected by the Congressional Budget Office to raise $149 billion over 10 years; the changes could lower that number around $60 billion to $80 billion, which now must be made up.

As of Thursday, no specific plan had been announced of where lawmakers would find that funding. Some reports have indicated that Democrats may target two industries that had offered to contribute to the health reform effort last summer—the hospital industry and the pharmaceutical manufacturers—for additional funding.

This issue of higher cost plans proved to be a troubling point to the labor unions who had been strong supporters of national healthcare reform legislation. Oftentimes, employees had bargained for higher cost policies and benefits instead of higher wages.

Rep. Joe Courtney (D CT), though, cautioned that the proposed deal was struck between labor leaders and the White House—and not members of Congress who need to evaluate the agreement.

Courtney, who had collected more than 119 House member signatures opposing the tax, had a briefing on Wednesday in which he released a Watson Wyatt study that showed that the tax would put a higher burden on employers located in higher-cost areas of the U.S.

The House and Senate still have a number of issues to resolve, such as the structure of the insurance exchanges and abortion language. Negotiations will continue today.

When House Speaker Nancy Pelosi (D-CA) was asked where they were in the negotiations, she responded: "We are close."

Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at

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