Baucus Senate Bill: Bad Deal for Middle Class - Tax on Health Care Plans Would Be a Disaster

For working families and union members, one of the most important goals of health care reform is getting health care off the bargaining table once and for all. Local 1152 President Mary Ellen Mazzeo, a veteran of contract bargaining, sums it up:  "Wouldn't it be great if we didn't have to worry in every round of negotiations whether our health benefits were going to be taken away? Or whether more of those rising costs would be shifted on us, further pushing down our wages and other benefit gains?"  Exactly.   

The bill produced so far by the Senate Finance Committee and introduced by Chairman Max Baucus (D-Montana) would be a disaster for working families and retirees. Here's why:

It calls for a 35 percent tax on employer health plans valued at $8,000 or more for individual plans and $21,000. Technically, the tax is aimed at insurance companies. But there's no question that the new tax will be directly passed on to working families. This bad idea would actually motivate CWA employers to cut benefits for active workers and eliminate coverage altogether for pre-Medicare retirees, so companies can avoid the tax. 

CWA's Research Department found that over a ten-year period, the additional tax that would be assessed on the median CWA employer plan would be $19,000 per active worker with family coverage, $8,000 per worker with single coverage and a whopping $43,000 per pre-Medicare retiree with family coverage.

"This plan will hit CWA-negotiated health plans hard and will make the nation's health care crisis worse than ever," said CWA Executive Vice President Annie Hill.

For pre-Medicare eligible retirees, the effect of this tax would be devastating. It will put tremendous pressure on employers to drop pre-Medicare retiree coverage altogether. If that happens, under the current Baucus plan, these 55-64 year-old retirees will have to buy coverage through the National Health Insurance Exchange at rates of up to five times higher than younger workers. And as more retirees in this age group are forced into the insurance exchange, the costs will increase. It's a vicious circle.

CWA negotiated plans and other union plans are not so-called Cadillac plans. CWA negotiated benefits are for the most part comparable to other plans, but negotiate limits on cost-sharing that non-union workers can't achieve. CWA members have made tradeoffs in wages and other benefits over the years to preserve quality health care and it is unfair to penalize CWAers and union members for choosing health care security.

High cost regions include many urban areas with significant medical resources and rural communities with a lack of competition in insurance coverage. Health care plans in these areas will be subject to the Baucus tax. 

Taxing health care plans is exactly the wrong solution for funding health care reform and CWA and allies will fight this bad approach.

There's a Much Better Way

There are many alternatives to paying for health care reform that don't penalize working and middle class families.

These include:

• Modest increases on individuals earnings more than $250,000 and families earning more than $500,000 would raise $318 billion.
  
  
• Negotiating prescription drug price discounts for the Medicare and Medicaid programs. This could raise as much as $80 billion in revenues.  
  
  
• Reducing the 14 percent subsidy that private insurance companies that participate in the Medicare Advantage program now get would raise $177 billion.