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Obama Meets with Union Leaders on Health Taxes

January 11, 2010

President Obama met with the head of the AFL-CIO and other labor unions Monday in an effort to allay their concerns over the tax on so-called “Cadillac” health insurance plans in the Senate’s version of the health care reform legislation.

AFL-CIO president Richard Trumka said in a speech earlier in the day that his union could not support the 40 percent excise tax on individual insurance plans with annual premiums of over $8,500 and family policies of more than $23,000. “The tax on benefits in the Senate bill pits working Americans who need health care for their families against working Americans struggling to keep health care for their families,” he said.

It may be difficult to find a compromise as several Democrats in the Senate remain opposed to the 5.4 percent surtax in the House version of health care reform on individuals making over $500,000 a year and couples making over $1 million annually. Obama favors the excise tax in the Senate bill, arguing that it would help control health care costs.

However, union leaders are warning the White House that Obama would be breaking his campaign promise not to raise taxes on people earning less than $250,000 a year. While the Cadillac tax is purportedly aimed at the “gold-plated” insurance policies provided as perks to corporate executives, it could end up hitting many union members whose unions have favored benefit increases over wage increases in contract negotiations with employers.

The tax is supposed to be applied to health insurance administrators and not employees, but unions are worried that employers and insurers will simply pass along the costs to workers or increase co-pays or deductibles to avoid the tax levy. With many in the House vowing to oppose the Cadillac health insurance tax, it’s likely to take more than one meeting in the White House to work out a compromise on the tax provisions in the final bill.

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