Lawmakers Agree to Scale Back Tax on Health Plans

Washington – The White House, congressional leaders and union officials on Thursday announced a tentative agreement in their health care negotiations, to pare back a proposed excise tax on high-end insurance policies for middle-class workers.

The compromise could break a deadlock in the health care debate — if enough lawmakers agree to it. Many details were unresolved, however — everything from how much the pared back tax would cost, to how a government health care exchange that collective bargaining units and employers might buy into over time would be structured.

Lawmakers hoped to finish negotiating an overhaul plan this weekend.

They agreed Thursday to significantly alter the original 40 percent tax contained in legislation the Senate passed Dec. 24 that would tax policies that cost more than $8,500 for individuals and $23,000 for families.

Under the agreement, the threshold for taxation would be adjusted based on companies’ or unions’ relative age, gender and ratio of workers in high-risk jobs. Dental and vision coverage would be exempt.

It also would give collective bargaining units a five-year delay before they’re subject to the excise tax. Over time, more Americans could get their insurance through a government-managed private insurance exchange, especially if they live in states with high insurance costs or participate in collective bargaining units.

The aim, as union bosses see it, is to tax high-end health insurance plans carried by wealthy business executives while shielding middle-class workers who bargained away their salaries in exchange for high-end health-care coverage.

Details, though, were sketchy. No firm cost estimate was available. The Senate plan would have raised an estimated $149 billion over 10 years.

Nor was it clear how they’d find the lost revenue. President Barack Obama has insisted on a plan that doesn’t increase deficits over a 10 years period; the Senate bill would cut deficits an estimated $132 billion.

House of Representatives leaders suggested that they could make further increases in the Medicare tax, now 1.45 percent. The Senate would boost that by 0.9 percentage points for individuals who make more than $200,000 and joint filers who make more than $250,000. House leaders are considering a bigger increase.

Some other key differences between the House and Senate version of health care legislation also remain unresolved, including abortion funding, a government-run health care plan and whether health exchanges, or marketplaces where consumers can shop for coverage, will operate largely on a state or national basis.

The House agreed to a government-run public option that would compete with the private sector, while the Senate prefers a federally-supervised system of multi-state, privately-run companies.

The tax issue is thus far the lone major breakthrough, as Obama and Democratic leaders were willing to pivot at the urging of one of their biggest bases, organized labor, even if it meant slowing the rate at which the plan the plan might ostensibly pay for itself.

“The president’s pleased with this agreement,” said White House communications director Dan Pfeiffer. “He was very clear that we cannot do health care on the backs of the middle class, and I think this agreement achieves that.”