White House Gains Agreement on Taxing High-End Health Benefits

The U.S. moved a small step closer to some form of healthcare reform today as The White House reached a tentative agreement with union leaders to tax high-cost insurance plans.According to an MSNBC report, "A family's health insurance plan would be subject to a hefty 40 percent tax if it costs over $24,000 per year, an increase from the $23,000 annual threshold in a previous version of the legislation. The cost of dental and vision care would be subtracted from the calculation yielding the total cost of a family's plan. Additionally, union members and state and local government employees with high-end insurance plans would not have to pay the tax until 2017."

The MSNBC report says that the tentative agreement was the result of more than 15 hours of negotiations at the White House that ended late last night. Participants included AFL-CIO President Richard Trumka; Andy Stern, head of Service Employees International Union; Anna Burger (no relation to this editor), head of Change to Win, and the leaders of unions representing teachers, government workers, food and commercial workers and electricians. The lead White House negotiator was deputy chief of staff Jim Messina; VP Joe Biden reportedly also was involved. Evidently Congressional Democrats also have agreed to this compromise.

The tax would be on plans often described as "Cadillac plans" -- a perhaps unfortunate choice of words given the current dire state of the U.S. auto industry, especially regarding GM, Cadillac's parent. Still, it aims to address the costs involved in making changes in the country's current healthcare system geared toward expanding coverage. Whether a tax on benefits would accomplish this goal or actually end up causing people to lose coverage (or to not be covered as effectively) remains to be seen.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio