In a conference call, leaders of America’s top unions announced their deal on the excise tax, one of the biggest flashpoints in the negotiations over a final health care bill. House and Senate leaders as well as the White House are on board with the new plan, which raises the threshold for which plans get captured, allows for a transition period for collectively bargained as well as state and local employee plans, and most interestingly, basically opens the exchanges to all employers after 2018.
AFL-CIO President Richard Trumka announced the details, saying that the labor movement has been fighting for health care reform for 60 years, and that this successful joint effort among multiple unions puts them on the path to victory:
1) The threshold of the excise tax will increase slightly, from $23,000 to $24,000 for a family plan, and from $8,500 to $8,900 for an individual plan. That will be the threshold when the tax kicks in by 2013. However, if health inflation between now and 2013 rises faster than current assumptions, the threshold will rise in tandem with that excess inflation.
2) The annual indexing is still the consumer price index plus 1% annually. That is historically lower than health inflation, so you still get a situation where more plans hit the threshold every year.
3) After 2015, dental and vision plans for all Americans, not just unions, get excluded from the calculation of the excise tax threshold. So only your main health plan would be included. (UPDATE: A labor spokesman emails that this alone raises the threshold close to $2,000)
4) For all Americans, the threshold rises for employer-based plans that are pricier because of age or gender. This is what is known as the “teacher tax” effect, where industries that employ older women, for example, at a disproportionate rate, have higher health insurance premiums. Richard Trumka told FDL News that each unit would be calculated separately, so there’s no way to explicitly say how much that threshold will rise, but the models indicate “a significant improvement”. NEA President Dennis Van Roekel said that this provision “adds equity and fairness into the bill.”
5) State and local employee plans, as well as plans that are collectively bargained, get until January 1, 2018, before their plans would be hit with the excise tax. This gives them time to re-negotiate their collective bargaining agreements. Trumka described this as “transition relief for employers and individuals.”
6) Most interestingly, by
2018 2017, all plans, whether collectively bargained or not, would be able to go onto the insurance exchanges, the large marketplaces where individuals can under the bill purchase insurance. Individuals getting employer-based coverage would still not be allowed to bolt their employer plan for an exchange plan, but their employer could purchase coverage on the exchange.
UPDATE: Just to be clear, this opening of the exchange by 2017 was always possible at the discretion of the HHS Secretary in the Senate bill, but according to Trumka, it’s a done deal.
That’s potentially significant. It lowers the firewall to the exchanges to a degree, provided that they are operating smoothly enough by
2018 2017 that employers would want to use them. If you increase the number of people on the exchange, suddenly the government is more on the hook to make them functional and operable. They don’t become low-income habitats, which typically leads to vulnerabilities in federal budgeting. If GE goes on the exchange, for example, there’s more bargaining power, and more of a federal responsibility not to make them suck.
It really all depends on whether they are perceived as a decent deal by
2018 2017, or if they’re offering crappy insurance at an unaffordable price.
Trumka, who was joined on the call by Anna Burger (CtW), Larry Cohen (CWA), Gerald McEntee (AFSCME), Dennis Van Roekel (NEA), Randi Weingarten (NFT) and other labor leaders, called the negotiations a “milestone,” and said that, subject to improvements in the final bill, labor would support the health care reform. All the other leaders concurred.
The cost impact of all these threshold rises and exemptions is that the excise tax would raise roughly $60 billion less over 10 years, Trumka said. This makes it $90 billion out of a $900 billion dollar bill, and not the major pay-for in any way. But raising that $60 billion from other stakeholders or with other taxes will be a priority.
Asked if this union carve-out was somehow unfair, Trumka emphasized the changes for all working Americans in the compromise, including the age and gender threshold, the exclusion of dental and vision, and the exchange participation option. Asked if union workers will still see benefit reductions when everything is implemented, Trumka said, “We don’t know. We hope the bill will start to ratchet down health care costs, as it’s designed, and nobody will have to feel the excise tax.”
MAJOR UPDATE: I’m told that the White House is walking back the idea that the exchanges would open to all employer plans, union and non-union, by 2017. If true, that makes it significantly less critical a deal, and unions consequently look more like they protected themselves here…
…Now it’s completely unclear. Some people say the exchanges would be open, some say it won’t. It’s a pretty key point, so the White House needs to come clear. Fortunately, the House has vowed that the bill will be online for 72 hours prior to the vote, so one way or another, we’ll know.