Drop tax on health benefits, say progressives

As Congress prepares its final push to pass health reform, a coalition of congressional progressives, the labor movement, and health reform advocates are calling for the inclusion of several key provisions in the finished product.

Most importantly, this coalition wants to see the final package include the House funding mechanism, which would raise taxes on the wealthiest people, instead of the Senate excise tax on the costliest health insurance plans.

The Senate excise tax generates revenue by taxing so-called Cadillac insurance plans. Many critics of the idea point out that insurance companies would pass the cost of the new tax on to employers and individuals who purchase these plans.

Former Labor Secretary Robert Reich told reporters, “The notion that there are ‘Cadillac’ plans out there is a misnomer.” He argued that most high-cost plans are based on age, region and occupation rather than on the value of their benefits. He further stated that the excise tax would likely fall disproportionately on small business and older Americans who already pay a premium on health coverage.

“The Senate bill falsely assumes that high cost plans generate high value for beneficiaries,” he added. “The Senate tax is too blunt an instrument.”

Rep. Joe Courtney, D-Conn., agreed and called for passage of the House version. He cited polling data from various sources that indicated Americans oppose the Senate excise tax by about two-to-one.

Courtney further appealed to the fundamental fairness of the House plan, pointing to studies that show as many as 27 percent of family insurance plans will be taxed under the Senate plan.

“Both on policy grounds and on political grounds, I think the House approach is the right approach,” Rep. Courtney explained.

Courtney has circulated a “Dear Colleague” letter to other members of the House urging passage of the House funding mechanism, which he says has garnered 189 signatures.

Lawrence Mishel of the Economic Policy Institute argued that the Senate excise tax would raise revenue to reduce the deficit but only at the expense of middle class families and small businesses. In the end, many people affected by the tax would simply give up higher cost insurance and look for less expansive plans with fewer benefits.

In a press statement last month, AFL-CIO President Richard Trumka said, “The benefits of hard-working Americans cannot be taxed to pay for health care reform – that’s no way to rein in insurance companies and it’s the wrong way to pay for health care reform.”

Along with the AFL-CIO, the AARP, which has endorsed both health reform bills before Congress, stated that the final bill should include a measure to close the Medicare prescription drug “donut hole” that forces middle income seniors to pay high out-of-pocket costs for drugs.

The pro-health reform coalition has diverged, however, on some other key points in the reform package. Labor and many progressive advocacy groups are demanding the inclusion of a public insurance option in the final bill. Many House Democrats, however, have resigned themselves to demands from Senators, like Joe Lieberman, I-Conn., who have threatened to join a Republican filibuster of the bill if a public insurance program is included.

Some media reports say that because of Senate intransigence House progressives have reluctantly dropped the demand for a public option. Instead they want a larger expansion of Medicaid coverage and bigger subsidies for working-class families to buy insurance plans on the private market.

To gain speedier final passage, congressional Democrats opted to avoid the traditional conference committee process. Instead, both houses will pass amendments to their respect bills to bring them into line. The procedure would bypass Republican interference, but would still require 60 votes in the Senate to avoid a filibuster.

Republicans have complained about the procedure, but have failed to explain how, after refusing to vote for the bill and attempting to block its progress, they would make any contribution to its final passage during a conference committee.

Photo: White House Photo



Joel Wendland-Liu
Joel Wendland-Liu

Joel Wendland-Liu teaches courses on diversity, intercultural competence, migration, and civil rights at Grand Valley State University in West Michigan. He is the author of The Collectivity of Life: Spaces of Social Mobility and the Individualism Myth, and a former editor of Political Affairs.